Public Authorities (Fraud, Error and Recovery) Bill

Baroness Finn Excerpts

2nd reading
Thursday 15th May 2025 Lords Chamber

[Baroness Finn (Con)]

My Lords, it is both a pleasure and a privilege to open my remarks by looking forward to and welcoming the maiden speech of my noble friend Lady Spielman. Throughout her career, she has embodied the highest ideals of public service: courage in the face of complexity, integrity under pressure and an unswerving commitment to the public good. We are fortunate to have her voice in your Lordships’ House.

The Public Authorities (Fraud, Error and Recovery) Bill arrives with a plain but powerful ambition: to protect public money from fraud. On this side of the House, we welcome that ambition, support it and wish to see it succeed. I have a note here to thank both Ministers, but I genuinely mean it when I say how wonderfully constructive they have been and how massively informative in the briefing sessions. I also thank the officials, who have patiently responded to numerous queries and questions posed.

But let me be clear: support for the goal must not mean silence about the means. As the Minister said, fraud is theft from the taxpayer and an insult to every citizen who plays by the rules. Every pound stolen is a pound denied to pupils in our classrooms, patients in our hospitals and families in need of homes. To tolerate fraud is to tolerate contempt for those who entrust us with their hard-earned money. We must act, but we must act wisely.

Before I entered your Lordships’ House, I worked across several departments of government, including the Cabinet Office during the coalition years when my noble friend Lord Maude of Horsham led vital reforms to introduce efficiency savings in government. We learned then what remains true now: fraud is not merely a technical failure; it is a cultural one. We encountered resistance. It was not indifference exactly, but something worse: a quiet preference for ignorance; a fear that exposing long-running frauds might implicate those who should have stopped them; a culture in which it was safer to overlook than to uncover. Ambition became cautious and initiatives dwindled to a timid “proof of concept” exercise. Today it is called “test and learn”, yet 15 years later one wonders how much more learning we really require.

What of the Cabinet Office’s role in this Bill? The Government propose granting expansive new investigatory and enforcement powers to the Public Sector Fraud Authority within the Cabinet Office. These powers include the authority to compel sensitive financial disclosures, seek court warrants to enter premises and seize evidence, access personal bank records without any duty to inform those whose accounts are being accessed and impose substantial penalties. All such powers are to be exercised administratively by officials ranked no higher than higher executive officer and without explicit ministerial authorisation.

Clause 3 permits officials to compel citizens to reveal extensive financial details. Clause 7 grants powers akin to those of police to seek warrants for searches and seizures. Clauses 50 and 53 enable officials to impose civil penalties without sufficient scrutiny. Yes, the Bill proposes an independent reviewer under Clause 64 to oversee these powers, but a closer look reveals that this reviewer possesses no statutory authority to halt or reverse potentially abusive or inappropriate decisions. Even more concerningly, their terms, resources and remit are entirely controlled by the Minister whose decisions they are tasked to oversee. Such arrangements risk creating oversight in name only—an illusion of accountability rather than genuine scrutiny. The Cabinet Office’s enforcement unit, we are told, will lead this charge. But who are they? How many officials are there in this unit? To date, we have been told it is 25, but will this information be published? What expertise do they possess and what data will they use? These questions remain unanswered.

It remains entirely unclear precisely what types of fraud these sweeping new powers will enable the Cabinet Office to investigate. The Government’s Explanatory Notes suggest that the Public Sector Fraud Authority will focus on fraud beyond the traditional domains of HMRC and the DWP. Yet this raises an immediate bureaucratic contradiction. If departments currently lack the powers or resources to tackle such fraud effectively, surely the logical step would be to empower them directly. Conversely, if departments already possess sufficient powers but prefer not to use them, we risk creating a perverse incentive for them to keep straightforward fraud cases in-house while transferring politically sensitive, legally complex or reputationally hazardous investigations on to the Cabinet Office—effectively outsourcing responsibility for difficult decisions.

Even more troublingly, the Cabinet Office is under no statutory obligation to accept cases referred by other departments, and the Government have provided no clarity at all regarding which types of fraud the Cabinet Office intends to investigate or decline. Compounding this confusion, the Cabinet Office has recently announced significant staffing cuts. We therefore face the surreal scenario of departments attempting to offload their most complicated and resource-intensive fraud cases on to another department that is undergoing headcount reductions and will therefore be ill equipped to pursue them. The inevitable outcome will be bureaucratic gridlock, with challenging cases bouncing endlessly between departments, responsibility blurred, accountability evaporating and serious fraud quietly slipping into administrative oblivion.

The scale of the problem we face is staggering. The National Audit Office reports that detected public sector fraud amounted to £3 billion last year, with the true scale estimated at possibly £28 billion. Benefit payments alone lost £10.2 billion to fraud and error, while temporary Covid schemes were exploited to the tune of £10.5 billion. Yet the Bill’s impact assessment forecasts just £22.8 million as a best-case scenario in financial return from the Cabinet Office’s new powers. We cannot allow a situation where the Cabinet Office is allowed to act like a second-rate bailiff, extracting modest sums through draconian means while ignoring the massive haemorrhage of taxpayer funds that continues in plain sight.

This side of the House supports the fight against fraud, but we will not support it blindly. Our goal must be a lean, sharp, just system that deters dishonesty, recovers stolen funds and never forgets the dignity of the citizens it serves.

I look forward to today’s debate and to Committee, where this House can do what it does best: improve legislation, ensuring that it not only sounds good in a press release but works effectively in the real world. We share the Government’s ambition and we welcome the Bill’s purpose, but we owe taxpayers something far better than good intentions. We owe them a system that truly works.

Public Authorities (Fraud, Error and Recovery) Bill

Baroness Finn Excerpts

Committee stage
Wednesday 25th June 2025 Grand Committee

Moved by

[Baroness Finn]

122D: Clause 95, page 61, lines 9, leave out “reasonably incurs” and insert “or banks as defined in this Act incur”
Member’s explanatory statement
This would permit costs incurred by banks, as they are defined in the Bill, to be recovered.

[Baroness Finn (Con)]

My Lords, many congratulations to the noble Viscount on the birth of his granddaughter.

Amendment 122D, in my name and that of my noble friend Lord Younger, touches on a principle that we have returned to time and again during Committee: that those institutions asked to play a role in the delivery of public policy must be treated not as passive instruments but as valued and active partners.

Clause 95, as currently drafted, enables the Secretary of State to recover costs from those individuals committing wrongdoing or fraud that the Secretary of State “reasonably incurs” in the exercise of the powers set out in this legislation. That is both logical and fair. However, what it does not do, and what our amendment seeks to rectify, is recognise that banks, too, will incur costs in the process of complying with the obligations imposed by this Bill. Those obligations are not trivial. Banks will be expected to carry out eligibility checks, respond to requests for information and facilitate direct deduction orders. These are significant operational functions, requiring staff time, system changes and compliance resources. The financial and logistical burden on institutions, particularly smaller and mid-tier banks, should not be underestimated.

We have heard repeatedly throughout Committee that the effective functioning of this legislation depends on strong co-operation between government and the financial sector. If that is true—we believe that it is, notably from what we have heard from the Government so far on the test and learn exercises—we must be honest about the responsibilities that we are placing on banks and we must be clear that those responsibilities come with real-world costs.

We understand that this arrangement between the DWP and the banks is new and, as such, it is unclear how many cases there may be to deal with. It may be a huge number, or it may end up being fairly minimal. Of course, we hope for the latter. More likely, this is an exercise of checking and counter-checking between the banks and the DWP in order to ascertain clarity of wrongdoing or not. It therefore begs the question of resources and costs. Can the Minister give us some estimates of the likely number of cases involved? Who will pay for the costs of managing these cases? If it is the banks, what discussions, if any, have taken place on the amounts? Is there an understanding of what happens if the costs become too great a burden on the banking sector? Is there some agreement that, if costs exceed a certain amount, the DWP—ie the taxpayer—will pay the excess?

We do not think that it is good enough to say that banks must comply. We must also ask how they can comply and what support or protections the Government are willing to offer them in return. Amendment 122D would provide a simple but important clarification: that banks, as defined in this Bill, are entitled to recover the costs that they incur as part of fulfilling their legal obligations. This is not about profit; it is about fairness, sustainability, and operational feasibility.

Let us not forget that we are asking private institutions to assist in the delivery of public sector enforcement mechanisms. That is a departure from many traditional roles and it is only right that we recognise the cost implications of that shift. We would not expect public bodies to take on additional responsibilities without due consideration of the costs involved, nor should we expect that of banks. They are not merely pipelines through which government powers are to be channelled. They are regulated institutions, fundamental to our economy, whose engagement in this regime must be underpinned by a mutual understanding of expectations, limits and recompense.

We have rightly asked for high standards of data protection, compliance and verification. We have spoken about building confidence in the system and ensuring proportionality in the exercise of power. That confidence must also apply to those partners on whom the success of the Bill relies. If we expect efficiency, we must also provide clarity, including clarity about the financial impact of compliance.

The other significant and important point to raise here is the impact of opportunity costs. We know that the banks will dedicate staff, time and resources to undertake these tasks, which will prevent them from undertaking core duties that would otherwise make them money. We cannot just focus on operational costs; we need to focus on the benefits that banks will miss out on as a result of complying with the Bill. Can the Minister therefore set out to the Committee how the Government will calculate the opportunity cost? Can she confirm that these costs will be determined in partnership with banks and where the money for the reimbursement of these opportunity costs will come from?

In the spirit of pragmatism and partnership, I urge the Minister to consider how the principles of our amendment could be taken forward. It seeks a small change to the text but would be an important signal to those we rely on to help deliver the objectives of the Bill that they will be supported, not simply directed. We all want to see this legislation succeed; we have made that point many times. For that to happen, those on whom it places demands must have confidence that they are part of a fair, transparent and properly resourced framework. Amendment 122D would help us move one step closer to that goal. I beg to move.

[Lord Palmer of Childs Hill (LD)]

My Lords, Amendment 122D, tabled by the noble Viscount, Lord Younger of Leckie, and moved and spoken to so fully by the noble Baroness, Lady Finn, would permit banks to recover the costs that they incur, as defined in the Bill. The principle behind the amendment is to recognise that, while banks play an essential role in supporting public authorities to identify and recover funds lost through fraud or error, the operational and administrative demands placed on them can be significant. Allowing banks to recover reasonable costs would ensure that the burden of implementing these public service functions does not fall unfairly on private institutions and would support a collaborative approach between the Government and the financial sector.

However, it is important to ensure that any cost-recovery mechanism is transparent, proportionate—how often we keep using that word—and subject to appropriate oversight. Questions remain about how the “reasonable costs” mentioned in the Explanatory Notes for Clause 95 will be defined, who will determine the quantum that can be recovered and what safeguards will be in place to protect individuals from excessive fees. There must be a clear framework to prevent costs from undermining the overall financial benefit to the taxpayer or placing undue hardship on those subject to deduction orders.

As the Bill progresses, it will be vital to clarify these details—I hope the Minister will help do that—ideally through the code of practice and ongoing consultations with stakeholders to maintain fairness, accountability and public confidence in the system. I await the Minister’s response, to fill the gaps that the noble Baroness, Lady Finn, and I have outlined, particularly what “reasonable costs” is meant to mean.

[The Minister of State, Department for Work and Pensions (Baroness Sherlock) (Lab)]

My Lords, I thank the noble Baroness, Lady Finn, for introducing Amendment 122D and the noble Lord, Lord Palmer, for his contribution. It is worth saying at the outset that the noble Baroness’s comments ran quite wide, encompassing some of the broader issues that we discussed in previous debates on the Bill.

New Section 80F, inserted by Clause 95, allows any reasonable costs incurred by DWP in recovering debt to be added to the total debt owed, and therefore for them to be collected through any means of recovery available to DWP. As drafted, the amendment would permit the Secretary of State, but not the bank, to recover any costs incurred by the bank as though it were part of the debt owed to DWP through methods of recovery such as deductions from benefit, et cetera, but without any requirement to pass any money recovered to the bank. I realise how hard it is to draft amendments in opposition—I have been there—so I believe it is possible that the intention of the amendment was to allow a bank only to recover any cost it had incurred when complying with its obligation under Schedule 5, so I shall address the amendment on the assumption that was the intention.

Officials have engaged extensively with key representatives from the finance sector, including UK Finance, and we are seeking to work collaboratively to ensure that the legislation enables banks reasonably to meet their legislative obligations without causing problematic burdens for them or unintended consequences for individuals. Indeed, changes have already been made to the Bill based on that engagement and feedback.

I agree that banks should be able to recover administrative costs associated with implementing a direct deduction order on behalf of DWP. These costs should be reasonable, providing some protection to debtors and consistent with existing legislation. In line with existing Child Maintenance Service recovery regulations, therefore, DWP will set the maximum limits for costs associated with implementing regular and lump sum deduction orders that banks can recover. Paragraph 24 of Schedule 5 further requires DWP to consult persons who represent the interests of the bank and any other appropriate persons in making the regulations.

On safeguards, banks are able to deduct any reasonable costs they incur when complying with a direct deduction order. In practice, that prevents a bank charging the debtor more than its costs. Paragraph 24 of Schedule 5 allows us to make provision about the administrative charges that can be imposed by banks. That power will be used to introduce a cap on the charges that can be imposed under this clause that can be adjusted in line with inflation to ensure that the charges remain reasonable at all times. I think we made that clear.

The code of practice spells out specifically what we will do in this area. I assure the noble Lord that we are discussing with the banks what is reasonable. This works in other areas. The code of practice says that banks may deduct any reasonable costs and that the costs that they can deduct will be limited by legislation and taken into consideration when the terms of the deduction order are done, to ensure that it remains affordable. I hope that, with those reassurances, the noble Baroness will feel able to withdraw her amendment.

[Baroness Finn (Con)]

I thank the Minister for her response. In closing, I want to reiterate that the Bill asks a great deal of banks, in terms not just of compliance, but of active participation in delivering government policy. That comes with real operational and financial demands, especially for smaller institutions, plus the opportunity cost for the time and resources that banks might be required to dedicate to these non-profit-making activities. I hear what the Minister says about the code of practice, but there is a difference between the code of practice and having something in the Bill. It makes an important change to ensure that banks, like public authorities, can recover the costs they incur when carrying out duties placed on them by legislation. We believe that it reflects a basic principle of fairness and partnership, which is a principle that we have returned to throughout this Committee.

I thank the noble Lord, Lord Palmer, for his support. He made the important point that oversight must be proportionate and transparent.

If we want this framework to work effectively and sustainably, we must ensure that those we rely on to implement it are not left bearing disproportionate costs. That should be absolutely clear. This is not about profit but about ensuring that compliance is feasible, resourced and built on mutual trust. I hope that the Minister will recognise the value of the amendment and the principle behind it. Those helping to enforce the law must be supported, not just expected to comply, and that should be in the legislation rather than the code of practice.

I appreciate the Minister’s remarks that discussions are ongoing with banks about how the demands will be incorporated and developed operationally. Can she confirm to the Committee whether this matter has been raised in the discussions and what assurances the Government have to date been able to give banks on this important question?

[Baroness Sherlock (Lab)]

I have been talking to the banks about everything but this is one of the less complicated parts. We are simply talking about the cost of making a deduction order. Banks are used to making deduction orders in relation to the Child Maintenance Service. On that, we agreed a fee and the banks can deduct reasonable amounts. We simply put a cap in. If anything has come out of the conversations that is relevant, I am happy to add it to a letter I give the noble Baroness. I should expect the matter we are discussing to work in a way analogous to how it has worked for the CMS, without difficulty.

[Baroness Finn (Con)]

I beg leave to withdraw the amendment.

Amendment 122D withdrawn.

Public Authorities (Fraud, Error and Recovery) Bill

Baroness Finn Excerpts

Committee stage
Wednesday 4th June 2025 Grand Committee

Moved by

[Baroness Finn]

1: Before Clause 1, insert the following new Clause—
“PurposeThe purpose of this Act is to enable public authorities to identify and prevent fraud and error and recover monies lost through fraud or error, and to strengthen mechanisms for reducing fraudulent activity across public services.”
Member’s explanatory statement
This amendment sets out the purpose of the Bill—to identify, prevent and recover public funds lost through fraud and error, and to strengthen mechanisms used to reduce fraud across public services.

[Baroness Finn (Con)]

My Lords, this is a serious Bill. It deals with a serious problem. Fraud against the taxpayer is not a footnote. It is not a rounding error. It is a threat to public trust and the integrity of government. We on these Benches support the purpose behind the Bill. We want it to succeed. We want it to be strong, clear and capable of making a difference from the moment it takes effect. In the days ahead, we will approach Committee with purpose. We will work with the Government where we can; we will press them where we must. Our proposals will be focused, practical and aimed at making the Bill stronger.

At Second Reading, we raised a number of issues. These remain our priorities. We want proper oversight of the powers granted to the Public Sector Fraud Authority. We want strong review mechanisms. We want protection for those who may be exposed or vulnerable and we want recognition of the cost burden placed on those who are asked to deliver these powers. These concerns are not confined to one party or one corner of the House; they are widely shared. They reflect a simple truth: good intentions are not good enough. If we are to defeat fraud, we need sharp tools, clear lines of responsibility and laws that do not fold under pressure. That is the task before us and the spirit in which we will proceed.

We will be starting our Committee stage discussion by covering some of the proposals put forward in relation to the Cabinet Office. We broadly support the intention of these measures, but we have several key concerns and suggestions around the Bill as it stands. First, the role of the Public Sector Fraud Authority remains ill defined, particularly in relation to other public authorities. At present, the PSFA can only act when invited by the very bodies it is supposed to scrutinise. This is not effective oversight; it is an invitation to avoidance. Departments can simply choose not to refer themselves.

More importantly, if they lack the legal powers to investigate fraud internally, these powers should be given to them directly. If they already possess them but fail to act, a central authority merely serves as a convenient place to offload difficult or politically awkward cases. Yet the Bill does not address this gap. It does not strengthen departments or build capacity at source. Instead, it hands sweeping new powers to the Cabinet Office and places responsibility for tackling fraud across the entire public sector in the hands of a team of now just 25 civil servants. That is not a credible model. It concentrates accountability at the centre without providing the means to exercise it effectively and it leaves the rest of the system with little incentive to act.

PSFA officials are handed sweeping PACE powers with no direct authorisation or legal requirement to pass a reasonableness test and can refuse to undertake an investigation with no duty to report the reasons why. The risk is obvious. Complex fraud will be passed from hand to hand, referred and re-referred, until it disappears altogether into the undergrowth of government.

Secondly, the Bill grants the Public Sector Fraud Authority powers of remarkable breadth. These include the ability to obtain information notices, issue civil penalties, apply for search warrants under the Police and Criminal Evidence Act 1984 and extract funds directly from bank accounts by order. These are not judicial decisions; they are executive powers exercised administratively.

Critically, the Bill allows these functions to be exercised not by Ministers but by civil servants, as junior as high executive officer grade, acting as authorised officers under Clause 66. There is no requirement for ministerial sign-off and, in many cases, no real mechanism for contemporaneous parliamentary scrutiny. The only oversight comes in the form of an independent reviewer appointed by, and reporting to, the same Minister whose powers they are reviewing. That reviewer cannot intervene, stop action or compel disclosure. They merely write a report after the fact, which the Minister is then required to publish. That is not accountability; that is delegation without control, power without visibility and scrutiny without consequence. A system that concentrates coercive legal powers in the hands of junior officials outside of clear ministerial direction not only is constitutionally careless but risks creating a grey zone of enforcement where power is exercised without responsibility and mistakes cannot be traced back to those elected to answer for them.

Ensuring that we find the right balance, where we develop the PSFA into an authority that has proportionate powers, a credible anti-fraud function and proper oversight, is the objective of our amendments today. Our first amendment, the purpose clause, is intended to ensure that the use of sweeping powers in the Bill is limited only to the purpose of identifying and preventing fraud and the recovery of public funds lost through fraud and error, as well as to strengthen mechanisms to prevent this in the future. We believe that it is a sensible, proportionate amendment that will ensure that the powers in the Bill are used only in pursuit of that explicit objective. A legal protection against the abuse of powers is a responsible safeguard and, given the extent of some of the powers granted in the Bill, anchoring that to the core purpose on which noble Lords across the House agree is, in our view, a reasonable measure.

Our role as the Opposition, as I said, is to question the Government, to challenge them on their reasons and their rationale and to make suggestions on how to improve legislation. I look forward to this Committee day, and those upcoming, to play that role. I beg to move.

[Lord Palmer of Childs Hill (LD)]

My Lords, there is really not a lot to say at this stage. We support the purposes of the Bill. Obviously, it is not meant to be a contentious Bill, but the interesting thing is the fine line that it draws between chasing people who have made honest mistakes and those who enter into fraud. As with income tax—if we still use the old words from my accountancy days—the difference between evasion and avoidance is sometimes a very thin line. We will explore where you draw that line in terms of how you chase people for mistakes that have been made, perhaps on purpose or perhaps in error. We look forward to the progress of the Bill to see where those lines are drawn.

--- Later in debate ---

Many of the specific issues raised by the noble Baroness, Lady Finn, the noble Lord, Lord Palmer, and the noble Viscount, Lord Younger, will be touched on in more detail as I continue to respond in Committee. I hope I have made the case clear not only for the Bill but for why it is unnecessary to add a purpose clause. To that end, I ask the noble Baroness, Lady Finn, to withdraw her amendment.

[Baroness Finn (Con)]

My Lords, our first amendment —to insert a purpose clause—has a clear and simple aim. The Bill grants sweeping powers, many of which can be altered and wielded through secondary legislation. Our purpose clause would ensure that any Administration exercising powers under the Bill will be tied to the core purpose that we have defined: to identify and prevent fraud, to recover public funds lost through fraud and error, and to strengthen mechanisms used to reduce fraud across public services.

As we begin Committee, we do so with a clear and constructive purpose. We support the principle of the Bill and share the goal of tackling fraud against the public purse. But as I said at Second Reading, support for the goal must not mean silence about the means. Our focus now must be on ensuring that the legislation is as effective, proportionate and accountable as it needs to be.

Through our amendments and contributions, we aim to improve the Bill—strengthening its safeguards, clarifying its powers and ensuring proper oversight. In doing so, we hope to help shape a framework that is both robust in its fight against fraud and respectful of the principles of fairness and transparency. We look forward to working with the Government and colleagues across the Committee to achieve that outcome. I beg leave to withdraw the amendment.

Amendment 1 withdrawn.

Moved by

[Baroness Finn]

2: Clause 1, page 1, line 12, after “preventing” insert “, investigating”
Member’s explanatory statement
This amendment probes the Government’s plans for the extent of the role of the Public Sector Fraud Authority in supporting other public authorities in tackling fraud against them.

[Baroness Finn (Con)]

My Lords, I apologise for not congratulating the Minister for choosing to spend her honeymoon in these august surroundings. What better way?

At Second Reading, I highlighted the cultural problem with tackling fraud—that it is often safer to overlook than to uncover—so we have to change the culture and ensure that proper tackling of fraud is a cultural practice embedded within every public authority and government department. There is merit in creating a body with the powers to investigate fraud externally, but we need to make sure that proactive prevention and investigation into fraud start at home. Our Amendment 2 seeks to create an obligation for the Minister for the Cabinet Office to support public authorities in undertaking their own investigations into fraud when it occurs in said public authorities. In further developing the PSFA, the Bill provides us with a new resource and opportunity to support departments to intervene early and create mechanisms through which they can tackle this issue internally.

This objective has several key advantages. One major advantage is that this approach recognises that public bodies are complex, with unique funding mechanisms and operational procedures. Internal fraud teams bring intimate knowledge of these environments and have greater capacity to pursue targeted objectives, using knowledge that external agencies may lack. This allows for swifter detection of anomalies, targeted interventions and smarter use of data and insight.

Another significant advantage is that conducting internal fraud investigations inspires deterrence. Internal investigations can often begin before fraud escalates or becomes systemic. Timely action minimises losses and creates a departmental culture that stands more firmly against fraud. Not waiting for an external body to point out what has already gone wrong can embed a culture of deterrence and proactive interdepartmental counterfraud measures, which are an opportunity to minimise losses and therefore departmental damage.

Of course, internal investigation must never mean internal cover-up. The answer is not to sideline external oversight but to complement it. We must ensure that departments are equipped with the right skills, resources and authority to carry out investigations properly and that they are held to account when they fall short.

Our Amendment 24 seeks to strike this balance by requiring public authorities to conduct an internal review if they lose £50,000 or more through an overpayment or fraud, and to provide that report to the Minister for the Cabinet Office. This measure seeks to meet the benefits that I have just outlined, while embedding in law that responsibility for fraud cannot be outsourced. Authorities that lose money must take account of why this has happened and, fundamentally, they must also take responsibility for it. Making them accountable to the Minister is a mechanism through which we can achieve this.

I hope that the Government will consider supporting the amendments in this group, which seek to embed departmental accountability for fraud while utilising the resources of the PSFA to create intradepartmental cultures that deter and counteract fraud. I beg to move.

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

My Lords, if we continue at this speed, the Chief Whip will be disappointed that we are doing only seven groups. It is probably unlikely that we will continue at this speed, but I can aspire.

While I appreciate the comments from the noble Baroness, Lady Finn, I want to be clear that Amendment 2 is unnecessary as it is duplicative. It would insert “investigating”, as a way that the Minister can support other public authorities’ actions in response to fraud, separately from the explicit function of investigating if a request is made of the Minister by the public authority, which is earlier in the same clause. It is unnecessary because the word “tackling” in the same line of the clause cited covers any activity to support a public authority dealing with fraud and supporting them in their own investigations too. It is deliberately drawn broadly so, if adopted, this amendment would not change the scope of Part 1.

The Government’s intention with Part 1 is for the PSFA to become one of the ways that public authorities deal with fraud, by requesting that it take on a case for investigation, enforcement or recovery. The PSFA is also happy to support other public authorities in their own fraud investigations, and already does so. Which option is best will depend on the facts of the case.

Amendment 24 would require departments to conduct an internal review if, following a PSFA investigation, it is confirmed that they have lost more than £50,000 to overpayment or fraud. All losses at this scale should already be investigated and reported on. There are established audit, assurance and reporting processes for this.

In addition, the facts of the case would already have been established by the PSFA, and learnings taken from it will be shared on a cross-government basis to aid the prevention of fraud—hence the establishment of the PSFA within the Cabinet Office. This amendment would create an extra burden on each department and replicate the work of the PSFA, and is unnecessary as its core aim will already be addressed through other activities.

I hope that this explanation reassures the noble Baroness, Lady Finn, and that she can therefore withdraw her amendment. I expect that we will discuss more of this in great detail as we continue.

[Baroness Finn (Con)]

My Lords, I thank the Minister for her response. As we draw the debate on this group to a close, I thank all noble Lords who have engaged with the issues—so I thank the Minister. We are clear in our recognition that tackling fraud must go beyond enforcement. It must be a culture embedded across every public authority and government department. Although it is right that the Public Sector Fraud Authority must have the powers and resources it needs to act decisively, with these amendments we highlight that fraud prevention cannot and must not rely on external investigation alone. The work must begin within departments themselves.

Amendment 2 reflects our view that the Minister for the Cabinet Office should have a duty to support public authorities in carrying out their own investigations, and the amendment seeks to use the resources of the PSFA to encourage early intervention, the development of internal counterfraud capability, and ensuring that every public body has the tools to act on fraud swiftly and effectively to counter fraud at home.

Our Amendment 24, which would require internal reviews for significant losses, is a proportionate and reasonable step towards building a culture of accountability across the public sector. If a public authority loses £50,000 or more through fraud or overpayment, it is right that the public body must work to understand what went wrong, and it is right that it must explain this to the Minister. Without our amendment, we risk allowing the same mistakes to recur, with no mechanism for learning or redress within the public body itself.

Our amendments seek to promote a culture of responsibility. They seek to ensure that no department or authority sees fraud as someone else’s problem or as a matter that will simply be dealt with elsewhere. The message that these amendments send is clear: tackling fraud must begin at home. These proposals are balanced, targeted and grounded in practical experience. I hope the Government will reflect carefully on these points and consider working with us to embed this into the Bill. I beg to withdraw the amendment.

Amendment 2 withdrawn.

--- Later in debate ---

Moved by

[Baroness Finn]

4: Clause 1, page 1, line 15, leave out “or error”
Member’s explanatory statement
This amendment seeks to probe the circumstances in which a public authority would recover an amount paid in error.

[Baroness Finn (Con)]

My Lords, our amendments in this group seek to address some of the limitations that the Bill places on the powers of the PSFA to undertake investigations on behalf of the Minister for the Cabinet Office when it is made aware that fraud is suspected or has occurred in a public authority. It is vital that, in further developing this resource, we ensure that it has the powers and the relevant responsibilities to tackle fraud properly and pose a deterrent to those who seek to commit it in our public authorities.

Amendment 4, standing in my name, seeks to probe the circumstances in which a public authority would recover an amount paid in error. It is important that we distinguish, throughout our discussions over these Committee days, between funds that were acquired by deliberate fraud and funds that were acquired because of a mistake. We hope that, in responding to this amendment, the Government are able to make clear their distinction between these two things and how this will be reflected in the exercise of the powers in the Bill.

Amendment 5 removes the requirement that public bodies must first request an investigation into suspected fraud before the Minister for the Cabinet Office may undertake an investigation. The Bill as it stands contains a considerable loophole that can easily be exploited if any public authority wishes to avoid an investigation into its affairs. The PSFA needs to have the legal capacity to undertake proactive investigations into fraud when it is made aware of appropriate instances or concerns. To rely on public authorities that may be conducting illegal activities to find it within themselves to own up before an investigation could even commence is far too weak. We need a counterfraud authority that proactively goes after fraudsters, not one that waits to be invited to investigate.

We are also concerned that the PSFA, even if a case were referred, could simply refuse to take it out of hand. There is no requirement for the PSFA to justify when a case has been refused if it chooses to do so, and we cannot therefore be certain that the information referred would be acted upon. This creates a direct disincentive for organisations to make representations to the PSFA to initiate an investigation. Why risk the reputational damage of an investigation if it could simply be refused for no apparent reason? This is an issue that we will seek to address and that I hope the Government will consider as an amendment to the Bill.

Amendment 6 would enable the PFA to undertake fraud investigations into HMRC and the DWP. This is an opportunity for us to simplify and co-ordinate counterfraud efforts across the public sector. We must ensure that we do not create a two-tier system in which some authorities are accountable to the Cabinet Office and others are not. This amendment would ensure that the PSFA can exercise these powers to prevent fraud and recover funds across these major public bodies to address the asymmetry that the Bill creates.

Our Amendment 7 balances our proposition that the PSFA be empowered to undertake proactive investigations with the control measures that would limit the use of the powers granted under Part 1 by requiring the Minister to be satisfied that there are reasonable grounds to suspect that fraud or attempted fraud has occurred. This test would ensure that investigations could be initiated only on reasonable grounds. The Bill as it stands provides considerable powers to the Cabinet Office in order to combat and prevent fraud. We need to ensure that these powers are exercised responsibly, carefully and for good reason. Our amendment would hold investigators in the Cabinet Office to a higher threshold before they could begin to exercise these powers, which will protect both the Cabinet Office and the people under investigation from abuse.

Finally, our Amendment 8 would ensure that the fee charged to any public authority by the PSFA would not exceed the amount of money that was recovered. This is a sensible amendment that would ensure that a fraud investigation did not come at a net detriment to the public authority. We feel that providing a legal guarantee to public authorities that they will not be left out of pocket as a result of an investigation is an important reassurance that must be made in the Bill.

Our amendments in this group seek to implement sensible, balanced improvements to the powers and role of the PSFA. By allowing this body to undertake proactive investigations into public authorities, which will include the DWP and HMRC, we will close the loophole in the Bill that allows public bodies to dodge investigations simply by failing to request one. This is balanced with controls on the powers of the PSFA requiring a reasonable grounds test to be met before commencing an investigation, and ensuring that any charges made out to public authorities do not exceed the amount of money recovered. We broadly support the Government’s proposition, although we feel that the purpose of this part—to recover money, combat fraud and deter future offences—will be better met if our amendments are incorporated. I beg to move.

[Lord Maude of Horsham (Con)]

My Lords, I will speak to Amendments 5 and 6 in the names of my noble friends on the Front Bench.

As I have said, I was the Minister for the Cabinet Office for five long years, during the entirety of the coalition Government—I am not sure that anyone else has been there for that long. Despite the best efforts of some in the higher levels of the Civil Service to have me promoted, moved sideways or eventually fired, I survived and outlasted them all. This was when the coalition Government took over—a time of fiscal crisis, with a budget deficit of some 11% of GDP—and it was urgent that the costs of government should be reduced. We were pretty successful in that: we reduced the running cost of government cumulatively over five years by £52 billion. We were DOGE before anyone had thought of it, and, frankly, we did it much more effectively.

One of the elements that we pursued was fraud and error, and indeed debt. We were surprised to discover that activity to counter fraud, reduce error and recover debt was not being seriously co-ordinated. You would have thought that this would be a core function of the Treasury but it was not; the Treasury’s view was that this should all be done in each of the individual silos, and of course that militates against effectiveness.

On the skill sets around countering fraud, et cetera, we concluded that this was a cross-cutting function that runs right across government and needs to be seen in that way. We started to introduce in a slightly makeshift way—piecemeal, making it up as we went along—what we now call the functional model. This is where these cross-cutting functions—procurement, IT and digital, major projects, and HR—are strongly led from the centre of government, with visibility into what is happening in those functions right across the Government. Of course, it is through all those functions, including financial management, that the money gets spent. However, the Treasury’s view, which is true of most finance ministries anywhere in the world, is that it looks at the verticals, and if something is in an approved budget line, that is it—you get on and do what you like.

There is an underlying assumption that all public servants are equally concerned about conserving public money but, regrettably, that is not universally the case. It is essential that there should be proper central oversight. Given the reluctance of the Treasury to take this seriously—as my noble friend Lord Agnew demonstrated vigorously when he resigned in the middle of a speech on exactly this subject, highlighting the reluctance of the Treasury to give it sufficient focus—the Cabinet Office is the place for this to be done. There needs to be proper oversight into how these functions are being run and are operating, and providing some real-time accountability rather than waiting for the Public Accounts Committee some time after the event, generally after the horse has bolted.

That is why allowing the Minister, through the Public Sector Fraud Authority, to intervene only at the request of a public authority seems justifiable in relation to the wider public sector, but in relation to central government departments, agencies, authorities and so on, it seems to be wholly indefensible. There is an assumption that all these authorities and entities will be so concerned to disclose what has gone on in their departments, in their own backyards, that they will willingly ask the Cabinet Office to intervene and be charged a fee for the privilege. I have to say that real life tells us that this is unlikely to happen because we have real-life experience to look at. When, during the coalition Government, it was disclosed that in one major department two suppliers to government had been systematically overcharging that department over not just a short period but a decade or so, it turned out that this had been known about for some time.

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Having explored each of these amendments in turn, I hope the noble Baroness, Lady Finn, will be prepared to withdraw her amendment.

[Baroness Finn (Con)]

My Lords, on this occasion I want to thank all noble Lords who have contributed. I hope that the Minister will recognise what we are proposing in this group are a series of amendments that would make meeting the objectives and purpose of the Bill easier. I thank her very much for her constructive approach. I especially enjoyed listening to the quotations from Managing Public Money, which used to be quoted extensively at me when I was in the Cabinet Office.

The proposals in the amendments would ensure that fraud could be proactively investigated and counteracted. That is the only way that we will bring fraud rates down, provide an effective deterrent to potential fraudsters and prevent departments dodging oversight by failing to request an investigation. The noble Lord, Lord Palmer, made the sensible case that public authorities must not go only after low-hanging fruit and duck difficult investigations.

I spent five long years as my noble friend Lord Maude of Horsham’s special adviser while he was in post. I spent that time learning from him, especially on the reluctance of the Treasury to engage properly with recovery on fraud. I am delighted that the PSFA has a dual remit and will report to both HMT and the Cabinet Office, but working closely with the Treasury was always a construct where the Treasury would assert its primacy, and I hope that does not happen in this instance if it works negatively.

I had a strong sense of déjà vu while listening to my noble friend Lord Maude of Horsham. He is correct when he says it is wholly indefensible that the PSFA must wait to be invited to conduct investigations into wrongdoing, and we will be probing on that. The DWP does not wait to be invited before it goes after benefit cheats, and there is no reason why public officials should be held to a different standard. The exclusion of DWP and HMRC is perplexing. My noble friend Lord Maude of Horsham correctly picked up on that and made the case—convincingly, I thought—for their inclusion in the remit.

The PSFA must always operate in the public interest, and ensuring that we have adequate thresholds for investigations is a well-established, sensible proposition. Our amendment would ensure that that threshold was included in the Bill so that we could be reassured that the PSFA would operate only once the reasonableness test had been satisfied, a point that was picked up by the noble Baroness, Lady Fox. The same can be said for a legal guarantee that recovering fraud must not come at a cost to the public authority in question.

In conclusion, we believe that our amendments in this group would improve what the Government have already set out in the Bill, and we hope the Committee will support us in incorporating these improvements. On that basis, I beg leave to withdraw the amendment.

Amendment 4 withdrawn.

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Moved by

[Baroness Finn]

9: Clause 3, page 2, line 32, after “and” insert “reasonably”
Member’s explanatory statement
This amendment seeks to ensure the Minister is required to have a reasonable belief that an information notice would be proportionate in each case.

[Baroness Finn (Con)]

My Lords, the powers granted in this part of the Bill are necessary in principle, although the core principle of proportionality, which guides our approach on these Benches, means that we have some suggestions for improvement. We need to make sure that this system has adequate safeguards, protections and balance. I want to reiterate the view that in pursuit of a legitimate objective, we do not succumb to a temptation for overreach or powers which are too sweeping.

Our Amendment 9 introduces a reasonableness threshold, which has to be met before an information notice can be submitted. This amendment is designed to ensure that the information notice, which imposes a duty on the relevant person to provide information to the Minister, is imposed on that person only if there is a reasonable belief that the information notice would be proportionate.

We need to bear in mind throughout these discussions that the Bill establishes a substantial array of duties and responsibilities, and we need to make sure that when powers are exercised, they are done so with those burdens in mind. Our proposal that these powers can be exercised only when seen as reasonably proportionate incorporates this balance and will ensure that additional operational burdens are not imposed unless thought necessary.

Further, Amendment 10 seeks to protect the person to whom the information notice relates from unfair treatment ahead of any final conclusion about their liability. Banks and financial institutions, particularly when the Bill first comes into effect, will naturally be concerned that they are being asked to provide information about one of their customers in relation to fraud. It is feasible that the said bank may want to withdraw some banking services from the person in question, and it is therefore a reasonable demand that the Government make clear that the person in question is not necessarily guilty of the suspected fraud. We need to make sure that the verdict is not inadvertently passed on the person before a conclusion is reached, and this amendment would ensure that an investigation does not end up constituting a sentence.

Our Amendments 11, 12, 13 and 14 all address the technicalities of the review mechanism and seek to probe the Government on why they have set up the review mechanism in the way that they have in the Bill, Amendment 11 questions the Government on why they have defined 10 working days as the lower limit for the period in which the person to whom the information notice is given has to comply with the demands in the notice. Can the Minister assure the Committee that this period has been set based on a discussion with relevant persons to whom this duty will apply? Again, we need to recognise that this is a duty being imposed on third parties, and we need to balance it with the other activities undertaken by those persons.

Amendment 12 seeks to clarify how a review process could be initiated by the person to whom an information notice is given, which, alongside Amendment 13, seeks to make it easier for the person to review this decision with a longer timeframe. Amendment 14 would oblige the reasons for any decision reached following a review to be set out in writing, placing an additional duty of responsibility and accountability to the Minister for the steps they decide to take.

Alongside the reasonableness test outlined in our Amendment 9, these provisions work to make sure that the powers under the Bill are exercised proportionately and that they are balanced alongside adequate provisions for review, which will promote the sensible application of these notices.

Finally, Amendments 15 and 16 seek to protect the information of a person which has been shared with the Minister by limiting the people with whom that information can be shared. Defining in law that only specific people can have sight of personal, sensitive information is a proportionate check on the power of the Minister and will have the twofold benefit of protecting people who, we must remember, are not actually necessarily guilty of fraud, with the need to check their information to ascertain this fact.

The principle of obtaining information about a person is necessary for the provisions in the Bill to work and the objectives we all share to be met. Our amendments seek to nuance and improve the exercise of these powers by adding a reasonableness test, a clarification of the review process and additional controls on data sharing to protect those to whom the information notice relates. We hope that the Government and noble Lords across the Committee will recognise these improvements to the provisions currently set out in the Bill on information notices and the relevant review processes, and that these will be supported as measured and balanced proposals. I beg to move.

[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.

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[Baroness Finn (Con)]

My Lords, as we draw this stage of the debate to a close, I want to reiterate our position that the powers granted in this part of the Bill are in principle necessary. I thank the Minister for her response, but necessity must always be accompanied by proportionality. That guiding principle sits at the heart of the contributions we on these Benches have made today and of how we will approach the remainder of Committee. We have sought throughout to ensure that the powers conferred by this legislation are tempered by appropriate safeguards and a clear sense of balance. In the pursuit of the legitimate and shared objective of tackling fraud against the public purse, we must be vigilant not to reach for powers that are unduly sweeping or risk unintended harm.

Amendment 9 introduces the threshold of reasonableness before an information notice can be issued. This is about recognising that every power granted imposes a corresponding burden. We must ensure that those burdens are justified and not excessive, although I absolutely take the point the noble Lord, Lord Vaux, made about where the word “reasonably” should sit. We will look at this going forward.

Amendment 10 would provide protection for individuals who may find themselves the subject of an information notice and who are not yet found liable, but are potentially facing premature consequences. The noble Baroness, Lady Kramer, raised similar concerns in this area. We want to prevent a situation in which an investigation becomes, in effect, a sentence. Banks and financial institutions in particular need clarity that a notice does not equate to guilt.

Amendments 11 through 14 examine the review mechanism proposed in the Bill. We have asked the Government to justify the 10-day working compliance period in an information notice and whether this reflects realistic operational constraints for third parties. We have also sought to strengthen the ability of the recipient to initiate a review, to provide more time for that review to take place and to require that the Minister’s reasoning be clearly set out in writing. These are sensible and measured proposals that will promote accountability and reinforce the legitimacy of the process, as attested by the justice group in its review.

Lastly, Amendments 15 and 16 address the handling of sensitive information. We propose that any data shared with the Minister under these powers be subject to tightly defined restrictions on further disclosure. This is a proportionate and necessary check, protecting individuals who may never ultimately face action while still allowing the Minister to undertake the task of fraud prevention.

The underlying objectives of this Bill are ones that we all share. Our amendments have been crafted to ensure that these objectives are pursued in a way that is fair, balanced and lawful. They offer reasoned improvements, a reasonableness test, a clearer and fairer review process, and better protections for personal data. I hope they will be supported at a later stage, but for now I beg leave to withdraw the amendment.

Amendment 9 withdrawn.

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Moved by

[Baroness Finn]

17: Clause 7, page 5, line 22, at end insert—
“(5) Within six months of the day on which this section comes into force, the Minister must prepare and publish guidance on the process by which authorised investigators are appointed in accordance with subsection (3).”Member’s explanatory statement
This amendment would require the Minister to set out the process by which authorised investigators are appointed in statutory guidance.

[Baroness Finn (Con)]

My Lords, our amendments in this group are based on a recognition of the fact that we are granting sweeping powers to investigators in the PSFA, to be exercised in the name of the Minister. This is, again, all about proportionality.

Amendment 17 would require the Minister to set out in statutory guidance the process through which authorised investigators are appointed. In combating fraud, we must protect against the creation of opaque but powerful bodies with inadequate oversight and accountability. Justice, a cross-party law reform and human rights organisation working to strengthen the UK justice system, recognises this amendment as an effective measure that would bring much-needed clarity to the process of appointment and the standards under consideration in that process.

Amendments 18, 19 and 20 relate to property. Amendment 18 seeks to probe the Government on the sort of changes they anticipate may be deemed necessary by the courts in relation to seized property. Before we vote to endorse this part of the Bill, I hope that the Government will take this opportunity to provide greater clarity on how they expect that the powers provided for under this part will be exercised, which is a particularly important point of clarification given that we are talking about property seized by the state.

Amendments 19 and 20 combined would prolong the period of time that must pass before an order to dispose of or destroy the seized property can be enacted. The seizure and destruction of personal property is a substantial power, and we must balance the practical consideration of holding seized property with a view to protect the rights of the individual to property which is theirs and which they have a right to recover. We believe that extending this period from six months to one year is a proportionate measure that would balance the practicalities of the process with the rights of the citizen.

Amendment 21 relates to oversight of the exercise of powers granted to the Cabinet Office under the provisions in this clause. If the Government deem it necessary to grant powers of this scale to the Cabinet Office in order to combat fraud, this must come with the acceptance that proper oversight and review of how those powers are used is a concurrent responsibility. This should not be left to the discretion of the Minister and ensuring that oversight is properly exercised from day one is a vital change.

Amendment 22 is an important measure designed, again, to ensure that sensitive information can be disclosed only to relevant persons. Although I am sure that this is simply an oversight in how the Government have drafted the Bill, clarifying the persons to whom information can be disclosed is an important safeguarding measure that would inspire confidence in investigations and ensure that confidence in the relationship between the IOPC and the PSFA is strong from day one. I hope that the Government and noble Lords will recognise this as a sensible improvement, which seeks to facilitate the role of the IOPC in the way that the Government have outlined.

The amendments in this group are rooted in a single, guiding principle: the exercise of significant powers by the state must always be matched by strong safeguards, transparency and oversight. We recognise the necessity of equipping investigators with the tools to combat fraud, but we must not do so at the expense of proportionality or the rights of the individual.

From the appointment of authorised investigators to the seizure and potential destruction of personal property, these powers touch on serious questions of liberty, accountability and trust in our institutions. Our amendments seek to ensure that powers are not only effective but clearly defined, properly scrutinised and subject to checks that protect both the public interest and individual rights. In strengthening the role of oversight, clarifying the limits on data sharing and demanding clear standards in the appointment and exercise of authority, these are far from wrecking amendments; they are constructive and measured. They reflect the careful, balanced approach we must take when legislating in areas where the state touches most directly on the lives and property of citizens. I hope the Government will engage seriously with these proposals and that noble Lords across the House will support them. I beg to move.

[Baroness Kramer (LD)]

My Lords, I will be brief. The Minister will be aware that false bailiffs knocking at your door are a major scam, and the PSFA clearly would not intend or hope to be a source of opportunity for people pursuing a scam in claiming to be part of its activities.

Has the Minister had the opportunity to talk to people such as those from StepChange to try to get a feel for how to deal with people who are vulnerable from whom they need to collect property or recover items? Has that charity been involved in shaping the framework for this particular set of issues?

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While it is right and proper for these points to be considered, the proposed amendments are not necessary. I therefore hope that the noble Baroness, Lady Finn, withdraws her amendment.

[Baroness Finn (Con)]

My Lords, as we conclude this group of amendments, I return to the fundamental point at the heart of our proposals. These powers, granted to investigators in the name of the Minister, are substantial. With them comes a responsibility on us as legislators to ensure that they are exercised fairly, transparently and proportionately. Once again, I thank the Minister for her courteous explanation and response.

This Bill seeks to equip public authorities to tackle fraud more effectively. We support that goal, but it is precisely because we support the objective that we believe that the framework within which these powers operate must be clear, balanced and just.

Amendment 17 would introduce a duty to set out statutory guidance on how investigators are appointed, which is a practical step, endorsed by Justice, that would ensure clarity and prevent the emergence of opaque, unaccountable enforcement structures.

Amendments 18 to 20 address the issue of seized property. I listened very carefully to the example of the seized laptop, but Amendment 18 seeks to probe the Government on the nature of the necessary changes to seized property that may be authorised by the courts, and we are asking the Government to clarify what kinds of modifications or uses they envision and under what circumstances. Transparency on how that property may be altered or used is essential.

Amendments 19 and 20 relate to the disposal or destruction of seized property. As the Bill currently stands, property may be destroyed or disposed of after six months. We believe that is too short a period, especially in complex cases where legal processes or appeals may still be ongoing. Our amendments would extend this minimum period to 12 months, offering individuals a more realistic opportunity to recover their property if it turns out that the seizure was not ultimately justified.

Amendment 21 addresses the question of oversight. The Government have taken the decision to grant significant new powers to the Cabinet Office in this section of the Bill. That is a serious move, and one that must be accompanied by serious scrutiny. Amendment 21 would ensure that oversight is built into the system from the start.

Finally, Amendment 22 offers a simple but vital clarification around the handling of sensitive information. This amendment would ensure that the information gathered under investigatory powers can be shared only with persons who are relevant and necessary to the investigation.

Taken together, these amendments form a coherent and proportionate package of improvements. They do not challenge the fundamental aims of the Bill; rather, they support them. But they do so while insisting that the exercise of power must be lawful, justified and always subject to scrutiny. I hope that the Minister will reflect on the points made, and on that basis I beg leave to withdraw the amendment.

Amendment 17 withdrawn.

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This is probing and seeks to establish why the Government considers it necessary to grant these powers to authorised investigators.

[Baroness Finn (Con)]

My Lords, it is me again. Our proposal in this group is that Clause 7 and the corresponding Schedule 1 do not stand part of the Bill. The powers granted to civil servants under the provisions in this clause are sweeping, and we believe that they are better exercised by those with adequate training and experience—namely, police officers.

I will cover in a little more depth what this clause is proposing. Clause 7 would allow junior civil servants in the Cabinet Office—relatively junior, at HEO level—to apply to a Justice of the Peace for a warrant to enter and search premises for material relevant to an indictable offence. These civil servants can enter the property whether the relevant person is present or not, and they will have the power to seize anything if they have reasonable grounds for believing that it has been obtained in consequence of the commission of an offence or is evidence in relation to an offence. Section 20 would grant these civil servants the power to seize computerised information, and Section 22 would allow PSFA investigators to retain seized property for as long as necessary in all circumstances.

These are police powers, yet under this clause they are to be exercised not by police officers but by civil servants who, however well intentioned, are under no legal obligation to have the legal training or operational experience that should be required to exercise such powers responsibly. We believe that if an intervention required as part of an investigation is serious enough to justify a search warrant and serious enough to justify entering a person’s private premises and removing their belongings, it is serious enough to require the presence of a police officer, who is recognised as the proper legitimate authority who should bear the responsibility for exercising these powers.

There is a practical point here too. If the Government believe that fraud against the state requires this level of intervention, they should work with law enforcement to build capacity, not bypass it. It is the job of the police to investigate crime, including fraud; that is the basis for their training. That is the established legal framework in which they operate and that is what the public expect. We should not seek to empower civil servants to do the job of police simply on the basis of current operational capacity. Once again, we return to our maxim of proportionality: we need to make sure that the necessary powers in the Bill are exercised responsibly and in a way that is both balanced and effective.

I want to be clear that what we are proposing will not prevent the PSFA undertaking its investigations. Once the threshold for the exercise of these powers has been met, the investigation itself will have had to progress considerably if a warrant is to be issued. Given the way these powers are set out in Clause 7, the Government are obviously certain that investigations will be able to proceed substantially without the need for these powers. Our proposal that they be removed from the remit of civil servants and held instead by the police, which is the established, recognised authority that largely wields these powers at present, will therefore not infringe on the capacity of the PSFA to investigate fraud, as recognised by the Government.

This is therefore another exercise in balance. We believe that our suggestion that Clause 7 and the corresponding Schedule 1 do not stand part of the Bill balances the need to counteract fraud with the imperative that we do not grant sweeping powers to civil servants who are not sufficiently trained, experienced or recognised to exercise them in the proportionate, measured and sensible way we need to be able to guarantee in the Bill. For those reasons we do not believe that Clause 7 and Schedule 1 should stand part of the Bill. We urge the Government to reconsider this approach and to ensure that powers of this magnitude are exercised only by those with the proper training, the proper accountability and the proper role: our police services.

[Lord Vaux of Harrowden (CB)]

My Lords, the noble Baroness, Lady Finn, has said it all, so I will be very brief. I have to say that I am extremely uncomfortable with giving these sorts of police powers to civil servants and others. We have an example in the recent past of powers being used inappropriately by a non-police agency in the Post Office Horizon situation. I am very uncomfortable about it. I am interested to hear why we should not allow the police to deal with these things and why we should give them to civil servants, but I will take some convincing.

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

The noble Lord raises a very interesting point. It is in the guidance, but I will write to him so that he has a written record.

[Baroness Finn (Con)]

My Lords, I thank the Minister and repeat that to spend her honeymoon in this way is truly admirable.

Our proposal in this group is straightforward: that Clause 7 and the corresponding Schedule 1 do not stand part of the Bill. The powers set out in them are neither minor nor administrative; they are both sweeping and consequential, as the noble Lord, Lord Vaux, pointed out. They are powers to enter private premises, to search them in the absence of the owner, to seize property and to retain it indefinitely if deemed necessary.

Clause 7 permits junior civil servants in the Cabinet Office to apply for search warrants in connection with indictable offences. These officials, who are under no legal obligation to possess police-level investigative training or operational experience, would be empowered to enter someone’s property and seize anything they believe is linked to a criminal offence. They may seize computerised information. They may retain this property for as long as they consider necessary. These are serious powers. They are, in every meaningful sense, police powers, and we believe that it should be the police who exercise them.

That is not a theoretical objection; it is a practical one. If the Government believe that the investigation of fraud against the state demands this level of intervention, they should work with law enforcement to build capacity, not attempt to bypass it—as I said previously. The public expect these duties to be undertaken by the police, not officials from within the Cabinet Office.

We are not proposing an end to investigations by the PSFA—far from it. We recognise the importance of this work, and the Government’s own framing of this clause makes it clear that investigations can proceed substantially without the need for these powers. If that is the case, transferring this responsibility to trained police officers, rather than allowing civil servants to exercise it, would not hinder the PSFA’s ability to investigate fraud. It would ensure that intrusive state powers are exercised by those who are properly equipped to wield them.

This is a matter of constitutional balance and operational integrity. Clause 7 and Schedule 1 confer powers that go beyond the traditional remit of the Civil Service. They risk blurring the lines between executive authority and law enforcement. We therefore hope that noble Lords across the Committee, and the Government, will consider supporting this proposal as a measured change, keeping powers in the remit of those who are best placed to exercise them, while ensuring that PSFA investigations can continue in the pursuit of the objectives we all support.

Clause 7 agreed.

Public Authorities (Fraud, Error and Recovery) Bill

Baroness Finn Excerpts

Committee stage
Monday 9th June 2025 Grand Committee

Moved by

[Baroness Finn]

23: Clause 10, page 8, line 19, leave out from second “authority” to end of line 21
Member’s explanatory statement
This amendment seeks to probe where the Government expects it would be appropriate for the Cabinet Office to retain a recoverable amount which has been recovered on behalf of another public authority.

[Baroness Finn (Con)]

My Lords, our amendments in this group seek to understand the sort of relationship the Government envisage between the PSFA and other public authorities, how the PSFA is to be resourced and sustained, and how we can incorporate greater independent oversight into how the PSFA will cover its costs.

Last week, our discussions covered the effect of the costs of counterfraud investigations undertaken by the PSFA on other departments and public authorities. As our Amendment 8 recognised, the Bill’s current proposals permit the recovery of costs by the Cabinet Office from public authorities, which could potentially be to their detriment. As we and the noble Lord, Lord Vaux of Harrowden, pointed out, this could create a direct disincentive for those authorities to do the right thing and could lead them to fail to refer cases to the PSFA.

As it stands, the PSFA, as constituted under the terms of the Bill, cannot undertake proactive investigations into public authorities even if it has information which constitutes reasonable grounds for an investigation. This places a massive burden of trust on public authorities to refer themselves to the Cabinet Office before an investigation can begin. This burden of trust is often open to abuse, as my noble friend Lord Maude of Horsham demonstrated to the Committee in his interventions last week.

The Bill creates an additional and major disincentive for public authorities to do the right thing and invite an investigation because, under the its terms, it is likely that they will also be left out of pocket. As we will no doubt hear again in the spending review later this week, money is incredibly tight. Why would any public authority invite the Cabinet Office to undertake an investigation into fraud in its department, given that this would likely cost it money—something the Government have not denied and something they are unwilling to protect against? Amendment 23 seeks to understand this question further and is intended to provide the Government the opportunity to outline when they believe the Cabinet Office would seek to retain funds recovered on behalf of another public authority.

Can the Minister assure the Committee that if the money allocated to a public authority is retained by the Cabinet Office following a counterfraud investigation, this will not come at the detriment of any policies, programmes or schemes the authority in question was planning or already had in progress? Counterfraud investigations should deter fraud, combat wrongdoing and recover funds. If money has been allocated to a public authority, it seems both sensible and correct that any money recovered should be returned to the relevant authority and not siphoned off into the Cabinet Office.

I understand that Clause 10 states that agreement must be reached between the Cabinet Office and the relevant public authority before any money can be retained by the Minister. However, if a public authority has been subject to a counterfraud investigation, is the Minister certain it will have adequate agency in this discussion to make the case that it should have its money returned to it?

Let us imagine that a council has been subject to a counterfraud investigation by the PSFA. The money has been recovered; those responsible have been removed from office and have been subject to penalties under the terms of the Bill. There is no reason to suspect the council is at risk of being defrauded any further, but the reputational damage has been done. The council may even have lost money to the PSFA under the terms of the Bill, stretching its budgets even more tightly. The council is in a desperate situation, but it has done the right thing. The PSFA is asking to keep the money it has recovered.

Is the Minister certain that, in negotiating with the Cabinet Office over this question, a council in this state would have the capacity, resources and, crucially, agency and perceived legitimacy to do so? What are the reasons the Cabinet Office would give to justify why it needs this money? Would this be a conversation the council could expect to do well in or is this pretty much a done deal—the PSFA will keep keep the money it has recovered and the conversation would be more of a formality? Clarity on these questions now will help us and public authorities understand where they stand in these discussions and the extent to which the Cabinet Office will seek to augment its own budgets as a result of claiming funds originally allocated to public authorities.

In a similar vein, our Amendment 25 seeks to ensure greater oversight of the amounts that can be claimed by the Minister when undertaking their functions and exercising the powers provided for in the Bill. The Minister in the PSFA appears to be in a position to determine their own costs and to recover them under the powers outlined in Chapter 4 of the Bill. Our amendment seeks to incorporate greater oversight in this process, and to ensure that there is a check on the Minister’s powers to recover amounts, by introducing a role for a recognised judicial authority. Requiring a court or tribunal to award the reasonable costs incurred by the Minister will prevent the Minister charging potentially unreasonable costs without appropriate oversight. In our view, this is a sensible measure; we hope that noble Lords will support it and that the Government will adopt it as a sensible check on the power of the Minister under this part.

Our amendments in this group provide the Government an opportunity to address some questions that we have around where the money recovered from counterfraud investigations goes and whether the Government are confident that the discussion between public authorities and the Cabinet Office on this question will be a fair one that ultimately benefits the taxpayer. Furthermore, our Amendment 25 seeks to incorporate greater independent oversight over the amount of money that can be recovered as costs to the Minister to make sure both that this is proportionate and reflective and that there are safeguards on the power of the Minister; I hope that the Government will seek to incorporate it. I beg to move.

[Lord Palmer of Childs Hill (LD)]

My Lords, I see the first amendment in this group as a purely probing amendment to try to clarify matters; I trust and have every hope that, in the debates on the Bill, they will be clarified.

I ask the mover of Amendment 25 and the Minister to clarify something. I wonder about the change to the end of the amendment, which says

“awarded by a court or tribunal in relation to costs”.

I would have thought that that was covered already under Clause 13(2)(b)(i), which refers to

“costs that are awarded by a court or tribunal on or in relation to a claim for a recoverable amount”;

I agree with that. Then there is sub-paragraph (ii), which is about the Minister exercising their powers. Is that not covered by paragraph (b)(i) without adding it to (b)(ii)? This is a purely technical point because I think that it is there already.

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[Baroness Finn (Con)]

I thank the Minister for her response. On the point raised by the noble Lord, Lord Palmer, we are looking at amending Clause 13(2)(b), on the relevant costs awarded in subsection (1) by a court or tribunal. The costs that are reasonably incurred by the Minister exercising powers in Chapter 4 are not determined by a court or tribunal, and the amendment seeks to see whether the tribunal should also play a role under subsection (2)(b).

As we conclude the discussion on this group, I return to the central questions that our amendments seek to address—how we ensure that efforts to tackle fraud in the public sector are not undermined by asymmetrical powers and make sure that the outcome from the processes set out in this part of the Bill benefit the taxpayer. We are all agreed that fraud against the public purse must be confronted robustly, but in doing so we must not create a framework in which public authorities are financially penalised for their co-operation, nor one in which the Cabinet Office is both investigator and beneficiary, retaining funds without transparent justification or sufficient oversight. As we have discussed, the PSFA cannot currently initiate proactive investigations and the burden falls heavily on public authorities to refer themselves, even when doing so may lead to reputational harm and financial loss. That is not a system that encourages good behaviour; it is one that risks disincentivising it.

Our amendments raise two practical concerns: first, that funds recovered through fraud investigations should as a matter of principle be returned to the authority from which they were taken, unless there is a compelling and transparent reason not to do so. We are concerned that, while agreement between the Cabinet Office and the public authority is required in the Bill, the agency and ability of a public authority to make a legitimate argument for retention of recovered funds may be impeded following a fraud investigation. Secondly, we wish to ensure that any costs that the Minister seeks to recover in undertaking these functions must be subject to independent oversight and not left to ministerial discretion alone. I totally take the point that the Minister made about the cost and burden on the judicial system, but there is also the principle of fairness and independence.

These are not abstract points. They go to the heart of whether this legislation creates a fair and credible system, one that public authorities can engage with in good faith and that the public can have confidence in. Our role in opposition is not only to make suggestions as to how the Government could improve their proposals but to ask questions of the Minister and to seek further clarification on the points the Government have considered. I urge the Government, therefore, to reflect on these proposals. They do not diminish the aims of the Bill but rather strengthen them by ensuring that the powers it creates are matched by the accountability and fairness that must always underpin public service. On that basis, I beg leave to withdraw.

Amendment 23 withdrawn.

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[Lord Palmer of Childs Hill (LD)]

My name appears on these amendments because I and my party are worried about powers being given to Ministers rather than to the courts. This puts the power in the courts because “the Minister” does not necessarily mean the Minister; someone quite low down in the Civil Service could make this decision. I think it is open to abuse.

I hope that when the Minister replies she can perhaps tell me how this fits in with a garnishee order on a bank. Garnishee orders have long been part of our legal system, whereby a debtor can collect money from the bank direct with an order from the court. I am amazed that we can have such a Bill here—I brought this up at an earlier meeting with the Minister—without “garnishee” appearing in it, because this is part of our current legal system. I invite the Minister and the mover of the amendment to incorporate that in their reply.

[Baroness Finn (Con)]

My Lords, the amendments proposed in this group by the noble Baroness, Lady Fox, and the noble Lord, Lord Palmer of Childs Hill, provide us with an opportunity to question the Government on the mechanisms they propose using to recover money. It is vital, as the noble Baroness said, that the powers provided for in this part are proportionate and sensible.

We are particularly interested in Amendment 29, which chimes closely with our belief that a reasonableness test should be incorporated as part of the exercise of powers. In this instance, the Minister must “reasonably believe” that a liable person holds an account with a bank before the bank can be served with an account information notice. We need to recognise that compliance with the provisions in the Bill, however proper and correct, will come at a cost to banks. This amendment seeks to impose a duty of due diligence on the Cabinet Office, which, as the party responsible for issuing the notices, should rightly be held to a high standard before it starts imposing responsibilities and costs on third parties.

As it stands, the Bill risks creating a situation in which the work that should really be done by the Cabinet Office is shifted over to banks. It is feasible that a civil servant in the PSFA, without the need to meet a reasonableness test, could send out information notices to dozens of banks and wait for them to come back to them to confirm whether or not the person in question does, in fact, have an account. I am sure that the Minister currently anticipates that civil servants will send out only a limited number of notices to the banks that they believe are relevant. However, it is not unrealistic to imagine that, during a busy period, someone in the Cabinet Office could be tempted to serve all the banks on their list with a notice and wait for them to revert, having done all the work. More importantly, there is nothing to prevent a civil servant from doing so. This is a serious point: it risks the workload being shifted from the Civil Service over to the private sector, burdening banks with non-profit-making tasks that they are legally obliged to undertake. The Cabinet Office’s civil servants must strive to reach the highest standards; the law should be clear on this point.

Amendment 62, also in the names of the noble Baroness, Lady Fox, and the noble Lord, Lord Palmer of Childs Hill, speaks to a principle that we have identified in our Amendment 55; namely, that a person against whom a deductions from earnings order has been served should not be held to an indefinite order if it has been suspended. The Bill, as it stands, would allow an order to be restarted at any point. For the liable person—and, in the case of orders against a joint account, for the other person with money in the account—this would create a great deal of stress and uncertainty. It also grants the Cabinet Office the ability to wield a great deal of power over the liable person, with few checks. The Cabinet Office should have the power to recover funds from the liable person that has engaged fraudulently, of course, but, in our submission, it should not have the power to threaten a liable person with a suspended deductions order for an unlimited period of time.

If it makes the decision to suspend an order, the Cabinet Office should be tied to a specific period of time in which it can restart the order. The Cabinet Office should be held to this standard, and the liable person should be protected adequately. We disagree with the noble Baroness, Lady Fox, and the noble Lord, Lord Palmer, that a suspended order should never be restarted, although we firmly agree on the principle that this power should be checked and should not be left open for an unlimited period of time.

I hope that the Government will consider these proposals as reasonable checks on the power of the PSFA in relation both to its ability to shift work over to third parties and to how it can wield these powers over liable people. We rightly expect the Cabinet Office to exercise these powers to a high standard. Ensuring that it does not outsource its workloads and that it concludes any checks or procedures within a certain time period are both proposals that speak to this high standard. I am sure that the Minister is confident that the officials in her department will meet these standards and, as such, that she will have no hesitancy in being able to back these proposals.

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Moved by

[Baroness Finn]

28: Clause 18, page 11, line 17, leave out “a reasonable period of time” and insert “5 years”
Member’s explanatory statement
This amendment seeks to specify a reasonable period of time for the recovery of an amount from a personal bank account, so as to protect the partners of liable persons from having an amount deducted from their joint account after five years.

[Baroness Finn (Con)]

My Lords, our amendments in group 4 are designed to improve the system of debt recovery that the Bill seeks to establish to make sure that adequate protections are given to the liable person, and that the Cabinet Office is held to a high standard in the exercise of the powers it is being granted. It is essential that we recover debt and combat fraud—I think that we are all agreed on that—but we must remember that in this Bill we are creating a system that will engage with and be run by real people. In these amendments we seek to tease out the practical problems that those real people might come up against while using this system. As we have heard, real people might well have messy lives. We have identified several potential such problems, and in this group we want to flag them to the Government so that they can make any changes needed.

Our Amendment 28 seeks to clarify the standards used by the Minister when determining whether or not they should make a direct deduction order to a joint account. The decision to make a deductions order from a joint account is a serious one, as it directly affects a person who is not liable, unless in cases which fall under Clause 18(3). The Minister must therefore be clear that certain conditions have been met before such a decision is taken, so that those who hold a joint account with the liable person are adequately protected from such an order.

The formula outlined in Clause 20(2) is a blunt tool, which we feel will struggle to operate fairly and effectively in practical terms. The formula assumes that the liable person’s interest in a joint account is of a fixed proportion, meaning that if there are two people holding a joint account, the Government will assume that 50% of the funds in that account relate to the liable person.

This has some obvious pitfalls, not least that, upon being informed that they are subject to a direct deduction order, the other account holder could move most of their assets out of the joint account, into a separate one. Say two people had a joint account with a balance of £50,000, split evenly between the account holders. Upon being informed that they were subject to a direct deduction order, the non-liable person could remove £24,999 of their funds into a separate account, leaving £25,001 in the joint account. Under the mechanism provided for in the Bill, the Government are to assume that 50% of these funds regardless belong to the non-liable person.

This mechanism risks creating an obvious loophole, in which the liable person, could, in essence, protect 50% of their assets by keeping them in a joint account. Conversely, the formula could have the reverse effect of penalising the non-liable person, if that person is due more than 50% of the assets in the joint account.

While the Minister is required under Clause 18(1) to assess the liable person’s beneficial interest, there is no requirement that they apply the deduction order to reflect this. Indeed, the Minister “must” presume that the liable person’s interest is proportionate, in line with this formula.

Our amendment makes it clear that the use of the formula to work out a liable person’s beneficial interest must only be a last resort. The Minister must make a proper assessment of the liable person’s beneficial interest before they resort to using the mechanism in Clause 20(2), which has many attendant problems, some of which I have highlighted.

Our Amendment 34 seeks to tie the Cabinet Office to a duty to provide notices to all other relevant persons within seven working days. At present the requirement is that the Cabinet Office undertakes this duty within a time period that it can itself determine. While the recovery of funds is of course right, we must consider the impact that this will have on the liable person. Indeed, it is highly likely that a deduction order will affect not only the liable person but other third parties who are not directly involved. For a person with a joint account, this will be the case.

The Cabinet Office is responsible for ensuring that the liable person and other third parties affected by a direct deduction order are informed of the fact as soon as possible. The Bill currently states that the notice must be given to the liable person

“as soon as reasonably practicable”,

but we believe that the Government should comply with this duty within seven days. Allowing this period to be determined by the Cabinet Office itself is not a secure guarantee, and the liable person should have a right to be informed of this fact within an explicit timeframe, both for their benefit and that of affected third parties.

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

I beg the leave of the Committee to consider that; I will reflect on it and come back in due course.

[Baroness Finn (Con)]

I thank the Minister. I thank my noble friend for bringing up the “Tell Us Once” service. A lot of people have said that it has brought them a lot of comfort after a relative has died; if this service could be incorporated here, that would be very good indeed.

In this group of amendments, we have made the case that, although the objectives of recovering public money, tackling fraud and commanding support are not in question, as we have constantly reiterated in Committee, the mechanisms by which the Bill proposes to do so raise legitimate concerns that cannot easily be brushed aside. I emphasise that our amendments do not seek to frustrate the intent of the legislation; on the contrary, they are designed to ensure that the framework being created is legally sound and operationally effective.

We are talking about powers that will reach into people’s bank accounts and affect the relationships that they have with innocent third parties, whether they be joint account holders or dependants; I heard very clearly what the Minister said about joint bank accounts but there are still issues here that may have to be worked through or thought about. This is a significant undertaking on behalf of the Government, and it comes with a weighty responsibility to get the detail right.

Today, we have raised not theoretical issues but practical, real-life scenarios where the Bill, as it is currently drafted, could cause confusion, injustice or unnecessary distress. We have heard how a blunt formula could allow assets to be shielded or, worse, wrongly seized. We have pointed to the risk of leaving innocent third parties in the dark. We have also highlighted the critical importance of transparency when powers are exercised and challenged. I should say that, in terms of the innocent third parties in the dark, the “Tell Us Once” commitment is most welcome.

It is not enough to say that the Cabinet Office will act reasonably. The law must require the Cabinet Office to do so. It must give people the right to be informed, the right to understand decisions made about them, and the right to challenge those decisions with the benefit of clear reasoning and evidence. We are not opposing the principle of direct deduction orders. We are simply asking for a system that reflects the complexity of real people’s lives and relationships, and that recognises that justice must not only be done but be seen to be done. We believe, therefore, that these amendments are proportionate, constructive and necessary. They would not weaken the Government’s ability to recover funds; they would strengthen the public’s trust in how that ability is used.

I say again: we support the aim of the Bill but, if we are to ask the public to accept a system of such reach and impact, we owe it to them to ensure that it is as fair, clear and humane as possible. I believe that our proposals today are a step towards achieving just that, and I hope the Government will give them the serious consideration they deserve. On that basis, I beg leave to withdraw.

Amendment 28 withdrawn.

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Moved by

[Baroness Finn]

32: Clause 19, page 12, line 35, at end insert—
“(11) In performing their functions under this section the Minister must have due regard to the operational and opportunity cost burden placed on the bank.”Member’s explanatory statement
This amendment would require the Minister to have due regard to the cost burden placed on the bank as a result of the use of powers granted to the Minister under Clause 19.

[Baroness Finn (Con)]

I apologise to your Lordships. The Committee will be fed up with hearing from me before the afternoon is out. No? Excellent.

We all agree that fraud against the public purse is wrong and must be tackled, but we must also be honest about who is being asked to do the work and at what cost. Banks are expected under the provisions in the Bill to dedicate staff, systems and time to support public sector fraud investigations or enforcement efforts. This may be in the form of complying with information notices, processing and applying deduction orders, or liaising with government departments. These activities are not core business functions for a commercial bank. They are not revenue generating. They do not serve the bank’s shareholders or contribute directly to its customers’ financial well-being. They are, in essence, a form of public service being performed by a private entity.

Here is the crux of the matter: every hour a member of the bank staff spends assisting with a public fraud case is an hour that they are not spending on risk management, product development, client service or revenue generation. That is a real and measurable opportunity cost: the bank is being asked to sacrifice its own commercial objectives to achieve a government policy goal. Regardless of the fact that this is a goal with which we all agree, we need to recognise that this is a burden on banks, even if it is in pursuit of a good objective.

Of course, banks have legal and moral obligations to help prevent criminal activity—and they do. However, we must be cautious about crossing the line between reasonable regulatory compliance and the outsourcing of state enforcement functions to private firms, without proper consideration of the attendant costs and effects that this could have.

It is also worth considering the cumulative effect. Banks are not only being asked to support fraud detection but simultaneously are dealing with sanctions enforcement and a growing raft of compliance burdens. The more we demand of banks in public service roles, the more we divert their resources away from their essential commercial purpose: financing the economy. So, while the fight against public sector fraud is essential, we must be alive to the costs that we are placing on others to carry it out.

Our Amendments 32, 38 and 54 would demand that the Minister has due regard to the costs that they are imposing on banks as a result of the exercise of their powers. We return to our core theme of proportionality: building into the Bill a regard to the cost burden on banks is a way that the imperative of tackling fraud is sensibly and responsibly balanced with the attendant costs that it imposes on private entities.

Further to this, our Amendment 33 would require the Minister to undertake a review of the costs being imposed on banks within 12 months of Clause 19 coming into effect. This amendment works alongside our Amendments 32, 38 and 54 in establishing the principle that the Minister must have due regard to the costs imposed on banks, and furthers this by demanding that the Minister undertakes a review of these costs a year after the provisions in the Bill come into force. In creating a duty to have due regard and combining it with the requirement for a review after a year, we have proposed sensible amendments which impose on the Minister an important obligation to the banks on which the Bill so heavily relies. We must make sure that, in our efforts to tackle fraud, we work alongside partners in the banking and financial sectors, not against them. These amendments will ensure that the Bill does that.

Finally, our Amendment 40 would ensure that the relevant bank is involved in determining the amount of money that it could recover to cover the costs incurred by complying with the demands under the Bill. At present, the Minister is able to unilaterally determine what a bank’s reasonable costs are. As I have outlined in my remarks, in complying with the Bill banks will incur not just an operational cost but an opportunity cost. Banks understand the complexity of their own systems; they know what it takes to divert staff from commercial roles to public service tasks. They are best placed to quantify the impact of compliance on customer service, internal risk management and technical infrastructure. To exclude them from this process of determining costs, to impose obligations without consultation or a mechanism for cost recovery, would be to create an asymmetric relationship in which the state demands and the private sector simply absorbs.

We are not asking for a blank cheque or for banks to name any figure they please, but there must be a structured and collaborative process, grounded in evidence, in which banks have a say in what their involvement truly costs and in how those costs are acknowledged and, where appropriate, reimbursed. This is therefore a sensible amendment which seeks to create that relationship between the Cabinet Office and the banks on which it relies. I hope the Government will consider it as a reasoned improvement to the Bill.

In conclusion, it is important that we do not overlook the practical realities of who is being asked to shoulder the burden of implementation. The provisions in this Bill place real and ongoing demands on the banking sector—not only in staffing and systems but in opportunity costs that affect banks’ ability to serve customers and grow the wider economy.

Our amendments do not seek to weaken the fight against fraud but to ground it in a framework of fairness, partnership and proportionality. By requiring that Ministers have due regard for the costs imposed, that those costs are reviewed and that banks have a say in assessing what they are owed, we introduce essential balance and accountability into this regime. These are moderate, practical and constructive proposals. If we are to maintain the willing co-operation of the banking sector in delivering the public good, we must also treat banks as genuine partners, not simply as instruments of policy. I hope the Government will take these amendments seriously, and I urge noble Lords to support them. I beg to move.

[Lord Vaux of Harrowden (CB)]

My Lords, I have amendments in later groups on the EVM section of the Bill with a similar effect to these, looking at the costs to the banks. This is not just about the impact on the banks, however. As many of us know from the experience of being politically exposed persons, when you put onerous responsibilities and costs on the banks that relate to a particular class of customers, you can create a disincentive for the banks to provide services to them. Most of us have probably had the experience of being PEP-ed, and it is not terribly pleasant. Here, if we are putting a load of costs on the banks that relate to benefit recipients, we make it less likely that those vulnerable people will be able to access banking services. The Government need to think about this quite carefully.

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

I remind the noble Baroness, Lady Fox, that what I actually said was that I did not want to speak on behalf of the banks. However, I find the word “coercion” a complete exaggeration and unnecessary. Just to clarify as well, the banks will not face penalties at any point in the Bill, unless I am to be corrected—and if I am wrong, I will correct the record. This is a process of trying to recoup government funds—taxpayers’ funds—to make sure that we get the money back. That is what we are trying to do and that is why this legislation is in place. We are working with the sector to make sure we can get our money back.

[Baroness Finn (Con)]

I think we all want to see a system that robustly tackles fraud against the public purse but that also recognises and respects the practical consequences of how it is delivered. The debate on the amendments in this group has shown that we need to be honest about the fact that in this Bill we are asking commercial banks to step beyond their core functions and dedicate staff time, infrastructure and internal resources to deliver outcomes for the state. When the public sector is asking the private sector to help to tackle public sector fraud, that is no small ask and should not be treated as such.

The noble Lord, Lord Vaux of Harrowden, and the noble Baroness, Lady Fox, have correctly highlighted the problems when you place onerous responsibilities on the banks in regard to a class of individuals. There is obviously a danger that it is going to make it less likely that vulnerable people can access services because the banks will just decide it is not worth the bother and will debank difficult or troublesome people. Those are very important areas to be worked through.

I really appreciate that the Government are still in discussions, but we are actually legislating here and now, and it is a bit uncomfortable that the discussions are obviously still ongoing while we are trying to refine the legislation. It would be good if we could keep this alive with what the banks actually want to conclude.

The amendments that we have proposed today on requiring due regard for cost, on ensuring review after implementation and on giving banks a voice in determining their recovery of the cost are all designed to introduce fairness, clarity and proportionality in what would otherwise be quite a heavily one-sided obligation. The amendments do not dilute the objective of the Bill, nor do they place unreasonable burdens on government. They recognise that the success of this policy depends on continued collaboration and good will from the financial sector, and that is something that cannot be taken for granted if banks are expected to absorb ever-growing public responsibilities without recognition or recourse.

We have heard much today about partnership in tackling fraud, but partnership requires reciprocity; it means listening, engaging and sharing responsibility—not simply offloading it. These amendments are an invitation to government to show that they understand that principle and to embed it in the Bill.

Before I finish, I thank the noble Lord, Lord Verdirame, for pointing the potential inconsistency in Clause 19, between subsections (4) and (10). We would be interested to hear how that will operate. This is not a question of principle—

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

Before the noble Baroness—I hope—withdraws her amendment, I need to clarify something, as I misunderstood the advice that I received from my Box. I need to apologise to the Committee and to make it very clear that there are penalties up to £300 a day that could be on banks —but it is more likely to be £300 under Clause 53, which is why we are working with them on guidance and why there are ongoing conversations.

[Baroness Finn (Con)]

I thank the Minister.

To conclude, these amendments are not on a question of principle, because we all support the purpose. It is a question of practicality and fairness and maintaining a constructive relationship between the state and the financial institutions on which it relies. I urge the Government carefully to reflect on that relationship and urge noble Lords to support the amendments in the interests of a Bill that is both effective and equitable. On that basis, I beg to withdraw.

Amendment 32 withdrawn.

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

My Lords, these amendments all relate to the determination of deduction amounts for regular direct deduction orders. Government Amendments 35, 36 and 37 amend Clause 23 to ensure that a regular direct deduction order from the Public Sector Fraud Authority must specify the amounts to be deducted. Government Amendment 43 is a consequential amendment to Clause 26.

Government Amendments 110, 111, 112 and 115 make an equivalent amendment for regular direct deduction orders issued by the DWP under Schedule 5 to ensure that the order must specify the amount to be deducted. These amendments arise from the continued engagement that we are having with representatives of the finance industry, as I said in the last group, and seek to address their concerns.

In this case, concerns were raised that the Bill potentially placed an unnecessary decision-making responsibility on banks and financial institutions—specifically, a duty that they may be required to provide or make a calculation of the amount to be deducted when receiving a regular direct deduction order. They requested that we remove these implied duties if it was the Government’s intent to always specify amounts to be deducted. As this is the intent of the PSFA and the DWP, we agree with the proposed suggestion to remove the references to calculations and make it explicit that government should always specify the deduction amount. These amendments achieve that under both parts of the Bill, address this concern and clarify the duties on the banks when making a regular direct deduction. I therefore beg to move the amendments tabled in the name of my noble friend Lady Sherlock.

[Baroness Finn (Con)]

My Lords, the government amendments in this group are in principle welcome. They sensibly seek to simplify deduction orders and ease the operational burden they place on banks—which, let us be clear, are intimately involved in enabling the exercise of the provisions in the Bill. However, the real issue here is not with the content of the amendments but with the process that led to their necessity. These changes are not minor corrections, nor are they are clarifications. They alter the way in which deduction orders function and work operationally. They exist because the Government have belatedly taken on board feedback from banks and financial institutions—institutions that clearly, and surprisingly, were not properly consulted before the Bill was introduced. As I said in the debate on the previous group, this raises serious concern about how the Bill is being developed.

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[Baroness Finn (Con)]

It is great to be having a dialogue with the noble Baroness. We welcome the Government’s amendments in this group which, taken together, amount to a series of technical clarifications and improvements to the Bill. As the noble Baroness said, they do not fundamentally alter the policy intent, but they help to tighten its operation, provide greater clarity and ensure that the provisions are more workable in practice. We broadly support these amendments and will not oppose their inclusion.

However, I note that even so-called technical amendments can have material consequences for those tasked with delivering the measures in the Bill—whether public bodies, private firms or individuals. It is important that any changes, however minor they may appear, are properly explained and fully understood by those affected.

I also take this opportunity to remind the Committee that, when a Bill is heavily reliant on secondary legislation and technical detail, as this one is, we must be especially vigilant in making sure that these fine-tuning amendments do not obscure bigger questions of transparency, proportionality and accountability. We will continue to keep a close eye on those issues as the Bill progresses. So, while we support this group of amendments, we urge the Government to maintain the spirit of openness and collaboration that they have shown so far as further changes inevitably arise, and to ensure that the cumulative impact of even minor adjustments is properly assessed. With that said, we are content to support these amendments.

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

I take this opportunity to thank the noble Baroness, Lady Finn, for both her engagement and support for this group of amendments and her wider engagement on the Bill.

While these amendments alone are relatively minor, together they reflect the importance of the ongoing consultation with key stakeholders, which is intrinsically linked with a desire to ensure that the legislation is as clear, precise and straightforward to implement as possible. The PSFA has consulted departments, public bodies, academics and non-public sector groups over many years of policy work to identify and resolve gaps in debt management powers across government. The PSFA has continued to work with stakeholders to consult on these powers as they go through Parliament and is committed to continuing to do so during implementation. We have listened directly to feedback raised by the financial sector and are taking the steps necessary to bring the clarity it seeks. I therefore hope that your Lordships will support these amendments.

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

My Lords, we recognise that there can be extenuating and difficult circumstances where someone has to take over another’s personal and financial affairs, such as making a power of attorney. Government Amendments 46, 61 and 121 clarify the role of a legal deputy with regard to the direct deduction order provisions for the PSFA and the DWP. These amendments follow our ongoing engagement with the financial services sector, which sought clarity as to how it would carry out a direct deduction order where a legal deputy has been put in place. We have benefited from the operational insight of the banks and have tabled this amendment to ease the operationalisation of the recovery powers.

Government Amendment 61 inserts an additional clause after Clause 36 to ensure that the provisions about direct deduction orders in Part 1 operate effectively where a person acts on behalf of an account holder by virtue of a power of attorney or as a court-appointed deputy. The amendment has the effect that any direct deduction order provisions and requirements have to be carried out by any legal deputies of the liable person, ensuring that recovery action can still proceed effectively.

Government Amendment 46 is a consequential amendment to ensure that the restrictions to prevent someone frustrating the direct deduction order will also apply to a person acting on behalf of an account holder.

Government Amendment 121 makes equivalent provision for the DWP as government Amendment 61 does for the PSFA. This brings clarity to the financial institutions that have to deal with deputies. It also brings protections to the liable person, ensuring that they are not unfairly given a non-compliance penalty if it is in fact their legal deputy who is not engaging with us on repayment or attempting to frustrate a deduction order. I beg to move.

[Baroness Finn (Con)]

My Lords, we welcome the Government’s amendment to make provision for cases where an individual with liability under the Bill has a person with power of attorney appointed to act on their behalf. This is a pragmatic step recognising that in some circumstances an individual may not be capable of handling their own financial affairs, whether due to age, illness or incapacity, and that there must be a clear legal route for compliance and communication to proceed.

It is right that, despite these circumstances, we should continue to recover public money that has been gained through fraud, given that adequate safeguards are in check, which I and my noble friend Lord Younger will address later in Committee. We therefore support the principle behind this amendment. It brings a degree of clarity and certainty to what could otherwise be a difficult area and ensures that the processes set out in the Bill can still function effectively when a liable person is not acting for themselves.

However, we wish to raise a concern which we hope the Minister can provide reassurance on. While this amendment provides for cases where a power of attorney exists, it does not appear to make provision for what happens when no such power is in place. In reality, there will be vulnerable individuals who may not have granted a power of attorney and who may also lack the capacity to manage their affairs independently.

In such cases, how will the provisions about direct deduction orders, as set out in Part 1, continue to operate effectively? Who is to be regarded as liable under the provisions in the Bill? Who will be entitled to challenge a notice or a penalty? Without a mechanism to address this situation, there is a risk that enforcement could falter—or worse, that it could proceed inappropriately without proper safeguards in place for the individual concerned.

We would therefore welcome the Government’s thoughts on how such cases will be handled in practice and whether there are plans to issue guidance or put in place safeguards to ensure that vulnerable individuals without formal representation are not unfairly affected by the processes introduced by this Bill.

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[Baroness Finn (Con)]

My Lords, I will speak very briefly on this group of government amendments which make a number of technical and definitional clarifications to the Bill. We on these Benches broadly support the changes in this group. These amendments serve an important purpose in tightening the language of the Bill and ensuring that the provisions are legally coherent, internally consistent and practically operable. We recognise the importance of ensuring that statutory language is as clear and precise as possible, not only for those who will be responsible for implementing these powers but also for those who may be subject to them.

In some cases, these amendments address minor inconsistencies in wording; in others they bring greater alignment between different parts of the Bill or between this Bill and the existing legislation. These are the kinds of technical improvements that are important to ensure that legislation operates as intended and we welcome the Government’s attention to detail in this regard. It is, of course, always preferable for such clarifications to be made earlier in the process—sorry to spoil it; it was getting too friendly—but we appreciate that, particularly in complex Bills such as this one, a certain amount of refinement is inevitable as the provisions are examined more closely by Parliament.

While there is no need to dwell at length on what are by nature technical changes, we support the amendments in this group and are pleased to see the Bill improved through their inclusion.

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

I thank the noble Baroness, Lady Finn. I simply end by stating again that the effect of these amendments is to clarify the drafting and remove redundant drafting that is already provided for. It is important that we have clear and precise legislation to aid implementation of these powers, all of which will be used to tackle the scourge of fraud against the public sector. Therefore, I hope noble Lords will provide their support to these amendments.

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Moved by

[Baroness Finn]

56: Clause 34, page 20, line 20, after “must” insert “appoint an independent person to”
Member's explanatory statement
This amendment would ensure reviews of decisions to make a direct deduction order are undertaken by an independent person.

[Baroness Finn (Con)]

My Lords, our amendments in this group seek to address an important point—the feedback loop which exists in the review mechanism for direct deduction orders. We believe that in order to have a legitimate review of a decision the review pathway has to be independent from the office which made the initial decision. We need to make sure that adequate checks and safeguards are in place so that the exercise of the powers under this Bill are both effective and fair. This is not only important from a political or constitutional perspective; it is the only way that we will create a legitimate and trusted system to combat fraud.

In practical terms, the Bill means that if a person affected by a direct deduction order or a joint account holder wishes to challenge that decision, the case is sent back to the very department that made it. This is not how we build confidence in public institutions nor how we meet the standards of fairness the public expect. This is, in essence, a legal framework which allows the Cabinet Office to mark its own homework. As the Government have made clear, the PSFA will remain a very small team for the foreseeable future. Under the system currently proposed in the Bill, close colleagues will be reviewing one another’s decisions. It is natural that one should expect this process to be independent but, based on the Government’s proposal before us, this can never be the case.

We on these Benches consider it an impossibility that a review system set up in the way the Government have set out can inspire confidence and hence command legitimacy. We have therefore tabled amendments in this group to give the Government the opportunity both to make these changes and to make the Bill operate with greater effectiveness and legitimacy.

Our Amendment 56 would compel the Minister to appoint an independent person to undertake a review of a decision when an application for a review is made. This amendment addresses the heart of our concern that, on receiving an application for review, the Cabinet Office should appoint an independent person to review what the Cabinet Office has decided. It should not be the case that the Cabinet Office reviews what the Cabinet Office has decided.

In our view, this is a common-sense amendment rooted not in politics but in principle. It reflects a widely accepted and fundamental tenet of good governance: those who exercise power should not also be the final arbiters of whether that power was exercised lawfully or fairly. Independent review is not a novel concept; nor is it controversial. To embed this principle here would be not radical but responsible—and it is essential if the Government hope to build public confidence in a new, far-reaching enforcement mechanism.

Building on that, our Amendments 57 and 58 would permit the independent person to reach a decision as to whether a direct deduction order should be upheld, varied or revoked. These amendments do not seek to hand the power to implement these decisions to the independent person; rather, they would ensure that they can make a determination on one of these three outcomes, which they must then communicate to the Minister, who must then share it with the applicant. We are not seeking to create a rival executive power or trying to strip the Cabinet Office of its authority. We are proposing a balance: the Government would retain ultimate responsibility, but that responsibility would be exercised in the light of a fair and independent review, not an internal second glance.

These amendments would ensure not only that the review process was made independent from the organisation that made the original determination but that the applicant would have sight of the decision that was reached by the independent person in relation to their case. This mechanism would ensure not only that the Minister, with their respective lines of accountability to Parliament, would maintain the power to implement a decision but that reviews of their actions would be truly independent and accessible to the liable person or joint account holder. Ensuring that the sweeping powers provided for in the Bill have proper, independent oversight mechanisms is fundamental to making sure that we balance the imperative of combating fraud with our responsibility to wield these powers proportionately and fairly. People must be assured that they can make a request for a review that will be independent and fair. This is the only way in which we can garner trust and create a system that is truly legitimate in the exercise of its powers.

Finally, our Amendment 59 sets out a proposal for how such an independent reviewer could be constituted as part of the Bill. As is made clear in proposed new subsection (2), the nominees for appointment to the position of the independent reviewer must, or should, undergo a pre-appointment hearing before the Public Accounts Committee; this would build in some accountability to Parliament ahead of the final appointment being made.

I emphasise that, although this amendment sets out just one vision of how the independent reviewer post could be formed, it speaks fundamentally in support of our view that the review mechanism built into the Bill must be independent of the Cabinet Office. The review process has the potential to impact significantly on how a deduction order is applied to a liable person or a relevant joint account holder. It is important that the process for review is effective, legitimate, independent and fair. The only way we can see this being achieved is through the incorporation of an independent review mechanism, a proposal for which we have set out in this group of amendments—Amendment 59 in particular.

Ensuring that liable parties can be assured of a fair review is a duty that we owe to those over whom Cabinet Office officials are exercising these powers. Providing a review process that relates back to the original body that made the decision is inadequate and, in our view, does not fulfil the obligation to provide effective avenues of appeal and redress. We must always remember that a person affected by a direct deduction order may have legitimate grounds to request a review of the decision. They deserve to know that, if they do so, they will be heard not by the same body that sanctioned them but by someone who is genuinely independent, impartial and fair.

The Government have argued that the powers in this Bill are necessary to tackle public sector fraud, but powers without independent scrutiny are at risk of creating overreach. If we are asking the public to accept strong measures in the name of fraud prevention, we must also guarantee that those measures will be exercised with proportion, accountability and justice. To allow the Cabinet Office to be judge and jury in its own cause does not meet that test. Our amendments, therefore, offer a sensible solution. They provide a pathway to restore confidence in the process—a pathway to fairness, legitimacy and the rule of law. I urge the Government to adopt them, and I urge noble Lords to support them. I beg to move.

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

I apologise if I was not clear. My point was that internal reviews are already a normal process within government. HMRC, the DWP and the Child Maintenance Service already adopt them.

[Baroness Finn (Con)]

I thank noble Lords and thank the Minister for her response. The noble Baroness, Lady Fox, may feel that this is consensual camaraderie. However, I can assure her that, while I am very grateful to the Ministers on the Bench opposite for their constructive engagement, I do not think there was very much consensual in what I said in my Second Reading speech on the powers of the Cabinet Office and various other parts of the Bill. I really did emphasise that I was very concerned about junior civil servants being granted sweeping powers, with the reviews and redress being carried out merely by a higher-grade official—the noble Lord, Lord Verdirame, made that point—within the same department and not by an external body. The concern has always been that the Cabinet Office is appointed as investigator, juror, judge and debt collector. The individual affected has limited power to challenge the decisions, and then only after the damage has been done. I have been very clear, I hope, on those concerns and will be clear as we carry on going through the Bill.

This debate has laid bare a crucial flaw at the heart of the Bill, one which speaks not just of good process but to the principle of fairness, accountability and trust in government. We cannot expect the public to accept that legitimate and fair review decisions as impactful as a direct deduction order can be undertaken by the same department that made the order the first place. Our amendments in this group offer a simple, reasonable and principled solution that, when a request for a review is made, that review must be carried out by an independent person or body.

I take the point made by the noble Lord, Lord Palmer, in this regard that we refer to an “independent person” but in Amendment 59 we refer to establishing a body to serve as an independent reviewer, so we are probing at the moment on how that might be set up, rather than being specific. The point is the independence of the body or the person. This should not be a colleague or a coworker and not someone in the same chain of command. No system of justice can command public confidence if it allows a single team to be judge and jury in its own cause.

Let us be clear. We are not seeking to tie the Government’s hands or strip departments of their operational roles; we are proposing a balanced and proportionate framework that keeps Ministers accountable to Parliament but ensures that the initial decision is subject to meaningful independent scrutiny. That is a safeguard for the individual and for the integrity of the system itself. This matters because the consequences of these powers will be real—they are sweeping powers, as I have repeatedly said—and immediate for the people affected. If those people are to have any confidence in the fairness of the system, they must know that their right to request a review is not simply a paper exercise. It is not good enough to say that this will be a small team and the risks are manageable. In fact, the small size of the PSFA makes the case for independence even stronger. Close colleagues reviewing each other’s decisions behind closed doors is a recipe not for fairness but for suspicion and mistrust.

Our amendments, particularly Amendment 56, place a simple duty on the Minister to appoint an independent person or body when a review is requested. Amendments 57 and 58 ensure that that person can reach a clear conclusion to uphold, vary or revoke the order and that the applicant is told what the decision is. Amendment 59 provides a model for how such a reviewer might be appointed, with proper parliamentary scrutiny.

If we truly believe in the legitimacy of these powers, we must also believe in the legitimacy of the mechanisms that hold them to account. A fair and independent review process is a necessity. This is not just a procedural issue; it is a test of whether this Government are serious about wielding these powers with proportionality, care and respect for the people over whom they are exercised. The public will not trust a system that allows the Cabinet Office to mark its own homework, and nor should they.

These amendments provide a path forward—a way to deliver a fraud prevention system that is strong but just, decisive but accountable, and both effective and legitimate. I urge the Minister to accept this principle of independence and to adopt these proposals or some version of them as important measures which would improve the system of review that the Government have presented. On that basis, I beg leave to withdraw.

Amendment 56 withdrawn.

Public Authorities (Fraud, Error and Recovery) Bill

Baroness Finn Excerpts

Committee stage
Wednesday 11th June 2025 Grand Committee

Moved by

[Baroness Finn]

60A: Clause 35, page 21, line 6, leave out subsection (5).
Member’s explanatory statement
This would permit the applicant to request a review into the existence/value of the payable amount.

[Baroness Finn (Con)]

My Lords, our amendments in this group seek to strengthen the rights of the liable person in the review process, incorporate further consideration of the cost burden we are asking banks to shoulder and ensure that parliamentary scrutiny can be applied to any further changes the Minister makes by regulations to direct deduction orders. As has been the spirit of all our amendments, we have an ambition to work with the Government to make suggestions for improvement on the provisions they have set out. We believe that our amendments in this group are an effective way of ensuring that oversight, parliamentary accountability and collaboration with partners in the banking sector are made a firm part of the Bill, which will make it more effective in achieving our common aim.

Our Amendment 60A would leave out Clause 35(5). As noble Lords will know, Clause 35(5) as currently drafted restricts the ability of an applicant to request a review into the existence or value of the amount they are said to owe. This amendment seeks to remove that restriction and, in doing so, restore a basic principle of fairness and accountability in the administration of public funds.

It is an established principle of public law that individuals should have the right to challenge the basis of a financial demand made upon them by the state, not just how it is enforced but whether it is rightly due at all. Yet, as things stand, Clause 35(5) precludes that possibility. It denies the applicant the right to request a review of either the existence of the debt or the amount allegedly payable.

Let us consider the potential consequences of this. An individual could be told that they owe a significant sum without any meaningful opportunity to question the underlying calculation or whether the liability even exists. That is not the mark of a fair or just system. It may be argued that efficiency or administrative simplicity requires limits to review rights, but this must not come at the expense of natural justice.

In matters of financial liability, particularly when imposed by the state, a person must surely be entitled to ask, “Is this right? Is this fair? Can I see how this was calculated?” This amendment simply ensures that the door is not closed on those reasonable questions. Moreover, transparency and accountability benefit not only the individual but the public authority itself. The ability to request a review can act as a safeguard against error, build public trust and ensure that determinations are robust and evidence-based. It supports better administration, not weaker enforcement.

To summarise, this amendment does not seek to open the floodgates to frivolous challenges. It simply allows a person the right to question whether a debt exists and whether the amount is correct—rights that are fundamental in any fair system. I urge the Minister and noble colleagues to support this modest but important change.

Our Amendment 61A seeks to add proposed new subsection (2A) to Clause 37. The amendment is straightforward, modest in scope but essential in purpose. It would require that any regulations made by the Minister under subsections (1) and (2) which relate to the operation of direct deduction orders be accompanied by an impact assessment. This assessment would focus specifically on the projected cost and the operational capacity of the banks tasked with implementing these orders, and would require that this assessment be laid before Parliament.

The rationale for this amendment is simple: regulatory clarity, economic realism and operational accountability. When these powers are exercised through regulations, it is vital that that is done with clear regard for the third-party organisations that will be shouldering the cost. Banks and financial institutions play a crucial role in the administration of direct deduction orders, acting as the operational arm of the enforcement process. They must identify accounts, verify balances, execute deductions and respond to any errors or disputes. These are not trivial tasks. They involve significant back-office effort, compliance oversight, system changes and, crucially, legal liability.

I and noble Lords across the Committee made our thoughts and concerns on this matter clear at the previous Committee day earlier this week, although I should reiterate that we are asking banks to dedicate serious resources to undertake functions on behalf of the public sector. If we are asking banks to do this, we must commit to working with them, not despite them. Yet, under the current drafting of Clause 37, the Government are empowered to make potentially significant changes to the rules around these orders without any obligation to assess or disclose the impact those changes may have on the very institutions expected to carry them out. This amendment does not block those powers; it merely introduces a duty to consider and explain the consequences. In doing so, it reflects good regulatory practice and ensures Parliament can properly scrutinise whether such changes are proportionate, practical and economically viable.

Let us remember that unintended consequences are often the product of insufficient consultation and opaque regulation. Requiring an impact assessment is not burdensome red tape; it is a basic tool of sound policy-making. It gives banks the foresight they need to prepare and adapt their systems responsibly, and it gives Parliament and the public confidence that the Government have weighed the risks and costs before acting. To summarise, Amendment 61A is not about resisting enforcement or shielding account holders. It is about ensuring that the infrastructure behind enforcement is fit for purpose, and that the decisions taken in Whitehall do not create avoidable burdens in the banking system, which could ultimately impact consumers as well.

Finally, our Amendment 61B proposes the insertion of a new subsection (6A), requiring that the outcome of the consultations carried out under subsection (6) be laid before Parliament prior to the coming into force of any regulations made under Clause 37. This amendment seeks to strengthen parliamentary oversight and transparency in the regulatory process. Currently, Clause 37 allows for regulations to be made following consultation but does not explicitly require that the results or finding of those consultations be presented to Parliament before the regulations take effect. This risks creating a situation whereby Parliament and, by extension, the public have limited visibility into the views expressed by stakeholders during consultation and how those views have influenced the final regulatory decisions. The amendment would ensure that Parliament is fully informed of the consultation outcomes before regulations are implemented.

This is vital for several reasons. First, it supports the principle of accountability. Parliament should have the opportunity to scrutinise not only the content of new regulations but the process by which they were developed, including the concerns, evidence and recommendations raised by those consulted. Secondly, it promotes transparency. Stakeholders, including financial institutions, consumers and civil society, can see how their input has been considered and can hold the Government to account if the consultation appears to have been perfunctory or to have ignored key issues. Thirdly, this measure will encourage better-quality consultations by ensuring that the Government give proper weight to responses before finalising regulations. In short, this amendment is a commonsense safeguard to enhance democratic oversight, improve policy-making and build trust in the regulatory process concerning these important financial regulations.

These amendments collectively serve to reinforce fairness, transparency and accountability at every stage of the process, from ensuring individuals have the fundamental right to challenge financial liabilities to safeguarding that banks are neither overburdened nor overlooked, and guarantee that Parliament exercises proper scrutiny over any regulatory changes. The amendments embody a commitment to responsible governance and collaboration with all parties involved and improve the Bill’s effectiveness in delivering its goals while protecting the rights of those affected. I respectfully urge all noble Lords to support these sensible and necessary amendments so that this legislation can proceed, strengthened by clarity, oversight and justice. I beg to move.

[Baroness Coffey (Con)]

My Lords, I support my noble friend Lady Finn, particularly on Amendment 60A, because as we go through this process it feels as though the Government are trying to be judge and jury on whether the existence of an order should apply at all. I am conscious that it is important that the Government be allowed to get on and have this more straightforward way of collecting money that they are due, but it strikes me as pretty draconian that the question of whether a debt exists cannot be challenged—it cannot go for review. I appreciate we are debating the amendment, but I say by the way, in reference to the Explanatory Notes for Clause 34 on the process for review, that the legislation does not point to the fact that it is supposed to go to a higher-grade person; I am sure that it will be set out in guidance, which I hope will have statutory standing. It strikes me as odd that, having not been able to even challenge whether the order should exist, you cannot go to a tribunal about it, either. Ministers will know that I wish that parts of the Bill would go further in trying to get money back from people in a variety of ways, but in this area I do not agree with the approach of the Government and certainly agree with that of my noble friend.

--- Later in debate ---

I hope that by outlining the process that we will be going through I have given some level of reassurance. I reassure noble Lords that every effort will be made to balance safeguarding throughout this process, making sure that appropriate and robust challenge has been incorporated into the Bill. We have done this through the prism of making sure that a vulnerability assessment is in place and that there is a balance between acting as a deterrent and regaining money that has been taken illegitimately from the public purse—so that we can retain it while also protecting individuals. The safeguarding that is in place, if it were to be utilised fully at every stop, could mean that this process would take up to two years before we started regaining any of the funds. The safeguards are there for a reason: we need to make sure that the balance is also there. I hope that this explanation reassures the noble Baroness, Lady Finn, and that she will therefore withdraw her amendment.

[Baroness Finn (Con)]

I thank the Minister for her response. As we draw this discussion to a close, I will return to the core principles that underpin the amendments: fairness, accountability and proper parliamentary scrutiny. We are dealing here with significant powers that affect people’s financial lives and impose responsibilities on third-party institutions. They must, at all times, be exercised with care and transparency. These amendments are about balance—ensuring the systems that we design to serve the public also protect the public.

Amendment 60A restores a basic yet essential right to question whether the debt exists and whether the amount is correct. However, I take note of the comments from the noble Lord, Lord Vaux, that this is potentially duplicative.

The Minister referred to Clause 66 and the authorised officer of a higher grade carrying out a review. The clause does not stipulate the level of the higher-grade official. I know that that is possibly nitpicking, but I think that it is still relevant.

Amendment 61A asks that, when regulatory powers are used to place operational burdens on banks, those impacts are first assessed and made transparent. It is a modest ask, but an important one. Banks are not silent agents of the state; they are commercial entities with obligations to their customers and regulators. As such, they deserve clarity, predictability and due regard from the institutions asking them to take on these roles. I disagree with the Minister that this is duplicatory, as the consultations with the banks are still ongoing. Therefore, we cannot say that we have reached any firm conclusions on what is going on.

Amendment 61B ensures that consultation is not merely a procedural check box but a meaningful process, the outcomes of which inform Parliament and shape decision-making. If we are to legislate well, we must know not just what is proposed but what has been heard and how that has shaped the result.

Together these amendments promote a better Bill that is robust, yet fair, efficient and accountable. They do not add unnecessary bureaucracy; they add safeguards. I end where I began—in the spirit of constructive improvement. These are reasonable, carefully framed proposals that aim to strengthen the legislation, not frustrate it. I hope that the Minister will reflect on them with that spirit in mind, and I urge the Committee to support the principle of these amendments as practical measures to ensure that the Bill works not just in form but in fairness. On that basis, I beg leave to withdraw.

Amendment 60A withdrawn.

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Moved by

[Baroness Finn]

61C: Clause 40, page 24, line 27, at end insert—
“(4A) The decision reached by the Minister under subsection (4) must be communicated to the liable person, with the reason given by the Minister provided in writing, as soon as is practicable.”Member’s explanatory statement
This would ensure that the liable person is provided with the outcome of the review of their representations by the Minister in writing.

[Baroness Finn (Con)]

My Lords, the amendments that we have tabled in this group seek to ensure greater clarity and communication between the liable person and the Cabinet Office; to ensure that costs are determined in conjunction with those who actually incur them; and to ensure that a suspended deduction order cannot be restarted over an unlimited period. These are principles that we outlined and argued for in our previous day in Committee, but they are important maxims and the only way in which we can construct in the Bill a system in which the public can trust.

Our Amendment 61C to Clause 40 seeks to insert proposed new subsection (4A), which would require that any

“decision reached by the Minister under subsection (4) must be communicated to the liable person … in writing”,

along with the reasoning for that decision. It would also require this to be done

“as soon as is practicable”.

This is a modest but important amendment. It would not alter the substance of the powers contained in Clause 40, nor would it constrain the Minister’s discretion. What it would do is place a clear duty of communication and explanation on the Minister once a determination has been made, ensuring that the person subject to that decision is properly and promptly informed.

This is not merely an administrative nicety; it is a matter of basic procedural fairness. If a person has exercised their right to make representations in response to enforcement action, often in situations of personal or financial vulnerability, it is entirely right and reasonable that they should be told in clear terms what decision has been reached and on what basis. Without such a provision, there is a risk of individuals being left in a state of uncertainty, unaware of whether their representations have been considered or why a particular outcome has been reached. This would not only be frustrating for the individual but could undermine confidence in the integrity and transparency of the process.

This amendment supports good administration. Providing a written decision with reasoning ensures that a decision is recorded, understood and open to further challenge if appropriate. It encourages clarity in decision-making and helps to avoid disputes or misunderstandings later down the line. It is also consistent with wider principles of public law. The right to be informed of decisions that affect one’s rights and obligations, as well as to understand the reasons for those decisions, is fundamental to administrative justice. Indeed, it is hard to see how meaningful accountability or the right to further appeal could exist without such a provision.

Let us not overlook the practical benefit. A timely written explanation provides certainty. It tells the liable person where they stand, where further action may be necessary and what their next steps, if any, might be. This amendment would not impose an onerous duty on the Minister; it would simply codify what many would consider to be best practice. It would bring clarity, transparency and fairness to the process. For that reason, I hope that the Government will consider this amendment and that noble Lords across the Committee will support it.

Our Amendment 61D is related to this principle of accountability and transparency. It would require the Minister to demonstrate in writing their consideration of a liable person’s wider circumstances upon request. At first glance, this may appear to be a procedural point, but, in reality, it speaks to a deeper principle: the right of an individual to know that their personal circumstances have been properly considered when a decision is made about them, particularly in a context where that decision could have serious financial and legal consequences.

Clause 41 rightly requires that the Minister be satisfied

“that the terms of the order … will not cause the liable person or a person within subsection (2) to suffer hardship in meeting ordinary living expenses, and … are otherwise fair in all the circumstances”

before authorising a deduction order. This is a welcome provision. It recognises that enforcement powers must be exercised proportionately and with an understanding of individual context. However, it is not enough to say that consideration will be given; there must also be a means of demonstrating that it has been. This amendment would address precisely that by ensuring that, where a liable person asks for confirmation of how their wider circumstances were assessed, the Minister is obliged to respond, in writing, setting out the outcome of that assessment.

The Minister might ask why this is necessary. The answer to that is because, without such a duty, the obligation to consider a person’s circumstances risks becoming a purely internal exercise—one that is neither visible nor verifiable to the person it affects. This undermines both transparency and trust. If the individual has no way of knowing how or whether their situation has truly been taken into account, the provision risks becoming hollow.

This amendment does not require a detailed statement of reasons in every case, nor does it impose an undue administrative burden. It says simply that, if the liable person asks, they are entitled to know how their situation was considered. That is not a radical notion; it is a matter of basic fairness, and it also supports better decision-making. When decision-makers know that they may be asked to justify their reasoning, they are more likely to give genuine and careful consideration to the facts, and when individuals receive that explanation, they are more likely to accept the outcome, even if it is not in their favour, because they can see that they were treated seriously and with respect. Moreover, it is consistent with principles of natural justice and administrative accountability. People should not be kept in the dark about decisions that affect them, especially when those decisions involve the exercise of coercive state powers over their finances.

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

The noble Lord makes a very interesting point, on which I will have to reflect and come back to him, if that is okay.

[Baroness Finn (Con)]

I thank the Minister and look forward to her reflections. In closing, I return to the core principle running through each of the amendments in this group: public confidence in enforcement powers depends not just on the ability to cover funds but on the manner in which those powers are exercised. The noble Baroness, Lady Fox, was also emphatic in this regard.

Whether they concern ensuring that decisions are properly communicated, that personal circumstances are demonstrably considered, that employers are consulted on the burdens placed on them or that enforcement is time-bound and proportionate, our amendments seek to build a framework that is seen as being as fair and accountable as it is effective.

We have not sought to unpick the intent of the Bill or to weaken the Government’s ability to recover what is owed. But we have sought to refine it responsibly and constructively, so that those affected by its provisions are treated with clarity, respect and procedural justice. We have argued, with these amendments, that decisions should be explained in writing, circumstances must be considered and shown to be considered, and powers must be bounded by purpose, not open-ended phrasing. I take the Minister’s points on “among other things”, but it is a rather clumsy way to write legislation. The fact that she introduced “among other things” and gave some examples shows that this should be more tightly drawn.

--- Later in debate ---

Moved by

[Baroness Finn]

63A: Clause 50, page 29, line 5, at end insert—
“(2) “Help” is defined in this section as the provision of any information, advice or support which could reasonably be assumed to be intended to acquire payments which are, or, if the payment was not made, would have been, a recoverable amount, or with the result that a public authority is entitled to claim any other recoverable amount.”Member’s explanatory statement
This amendment would ensure that those seeking to aid fraud through the provision of any information, advice or support could be subject to a penalty.

[Baroness Finn (Con)]

My Lords, our amendments in this group seek to clarify definitions with a view to combating those who seek to encourage and facilitate fraud, and to incorporate further checks on the exercise of powers in this part of the Bill. Our Amendment 63A seeks to define “help” for the purposes of this clause, clarifying that it includes the provision of any information, advice or support that could reasonably be assumed to be intended to obtain fraudulent payments from the public purse.

This amendment may appear, at first glance, to be a matter of drafting, but it goes to the very heart of a growing, pernicious challenge that we face in safeguarding public funds—namely, the rise of individuals and groups who use online platforms to encourage, facilitate or instruct others on how to commit fraud against public bodies. These individuals do not necessarily commit the fraud themselves but they profit from or promote the circumvention of rules, frequently offering guides, tips or templates for making false claims for benefits, grants or other forms of public support. Some go further still by sharing videos, creating paid content or selling advice designed to enable abuse of the system. This is organised dishonesty masquerading as financial empowerment, and it is costing the taxpayer dearly.

Yet, as the law currently stands, there is a grey area around the liability of such actors. If they do not physically submit the fraudulent claim themselves, their role in enabling or encouraging fraud can be harder to pin down, unless we are clear about what constitutes help in this context, and that is precisely what this amendment would do. It defines “help” broadly and practically as

“the provision of any information, advice or support which could reasonably be assumed to be intended to”

secure a fraudulent payment or assist in one being made. Crucially, it also covers situations where the advice or support would, if acted on, result in a recoverable amount being owed to a public authority.

This is a necessary clarification—one that would put would-be facilitators of fraud on clear legal notice that their conduct is within the scope of enforcement. It would help to bring the architecture of the Bill into line with the realities of modern digital fraud, where facilitation often takes the form of social media content, forums or online transactions, rather than backroom collusion. It would also serve as a strong deterrent function. By defining the provision of such support as within the scope of a penalty, it would allow for enforcement against not only those who commit fraud directly but those who empower others to do so, whether for financial gain, notoriety or both.

Fraud against the public sector is not a victimless crime. It deprives vital services of much-needed resources and undermines public confidence in the integrity of our welfare and support systems. Tackling this threat requires more than good intentions; it requires clear definitions, enforceable powers and a willingness to adapt to new forms of criminality. This amendment would deliver precisely that by ensuring that Clause 50 is not hampered by ambiguity and that those who seek to game the system from the sidelines cannot hide behind the veil of plausible deniability. I urge the Minister and noble Lords to support this amendment as a practical, proportionate and targeted step toward a more robust framework for defending the public purse.

Amendment 63B is based on the simple principle that there should be a balance of oversight and determination when it comes to the exercise of these powers. We propose that the decision to impose a penalty under Clause 52, specifically in cases where no payment has in fact been made, should not rest solely with the Minister but should instead be made by the First-tier Tribunal. This amendment is founded on a straightforward and essential principle: where the Executive are empowered to impose penalties of potentially significant financial consequence, there must also be a mechanism of independent oversight. Determination and discretion must be balanced with transparency and accountability.

Clause 52(2) allows for a penalty to be imposed where no payment has been made based on what the Minister believes the person would have received had the conduct not been intercepted. In other words, the clause enables a financial penalty to be levied on the basis of a hypothetical amount determined solely in the opinion of the Minister. That is a considerable power. It allows for punitive action on the basis not of actual harm or financial loss but of a projection—that is, a judgment from the Minister as to what might have happened under different circumstances.

This is precisely where judicial oversight is most important. If a penalty is to be imposed based on counterfactual reasoning on what could have occurred but did not, surely the case for an independent expert body to assess that reasoning is overwhelming. This amendment would simply substitute the First-tier Tribunal for the Minister in this context. The tribunal already has competence and infrastructure to assess evidence, weigh intention and determine appropriate sanctions. It is an established part of our administrative justice system and is well equipped to adjudicate in complex or borderline cases where intent, probability and public harm are at issue. It also has a legitimacy in the eyes of the public that the Minister does not possess.

Such an approach has several benefits. First, it enhances procedural fairness. Individuals who face serious penalties, especially in cases where they did not actually receive any funds, should be entitled to a hearing before an impartial body rather than be simply the recipient of a notice based on ministerial opinion. Secondly, it promotes consistency and accountability. Tribunal decisions are subject to precedent and scrutiny. Ministerial discretion, by contrast, may vary from case to case and lacks the transparent reasoning that accompanies judicial decisions. Thirdly, it safeguards public trust. The public must have confidence that enforcement powers are being used fairly and not arbitrarily. Independent oversight gives legitimacy to the exercise of those powers.

This is not an argument against penalties, nor against enforcement; it is an argument for fair process and proper checks. The power to punish, even when no actual loss has occurred, must be subject to more than internal ministerial judgment. In short, where the Government propose to act based on what might have been, we must be particularly careful. The wider the discretion, the stronger the need for oversight. This amendment achieves that balance. It leaves the Government able to pursue wrongdoing but does so in a way that is consistent with our traditions of fairness, due process and independent adjudication.

Amendments 63C and 63D work together to incorporate the principle that the Minister sets out in writing the reason behind a decision reached, following a review. As we have stated several times, this mechanism is vital in ensuring that we establish clear lines of communication between the Cabinet Office and the liable person, allowing them to access information which they are legitimately and reasonably entitled to. It also allows the Minister to be held accountable for the reasons behind his decision when reached. These are principles that I have emphasised in earlier remarks, but this is a simple but important mechanism that would ensure clear communication, clarity and accountability at a minimal cost. I hope that the Minister and noble Lords consider this a reasoned improvement to the Bill as it stands.

Finally, our Amendment 64A seeks to incorporate greater parliamentary oversight of any changes made to the appeals process—a fundamental safeguard in the Bill that must be protected through proper oversight. Our amendment seeks to strengthen the safeguards around how changes may be made to the appeals process relating to penalty notices issued under the Bill. As the clause currently stands, subsection (6) provides the Minister with the power to make further provision about appeals against a penalty notice through regulations made at the Minister’s own discretion. Our amendment would remove that sweeping discretion and instead require that any further changes to the appeals process may be made only following an independent review and with the approval of a parliamentary committee of any recommendations arising from that review.

The justification for this change is both principled and practical. The power to levy financial penalties under the Bill is significant. Given the potential consequences for individuals and organisations, the integrity of the appeals process is absolutely central to the fairness of the regime. It is vital that those who are subject to penalties under the Bill feel confident that the means of challenging or appealing those penalties is robust, independent and protected from politicisation or erosion. That confidence depends in part on ensuring that the rules governing the appeals process are not liable to unilateral change by the very Minister responsible for enforcing the penalties.

This is not about casting doubt on the current Minister’s intentions but about future-proofing the system. Power should never be unchecked simply because we trust those who currently hold it. This amendment would put in place a sensible and proportionate safeguard whereby, before changes are made to the appeals framework, an independent review must be carried out and Parliament must have a meaningful role in assessing and approving those changes. When the state is empowered to impose penalties, it must accept the responsibility of making sure that appeals are independent, accessible and fair, and that the framework governing them cannot be rewritten without scrutiny. This amendment helps to ensure just that. It does not prevent change but ensures that change is evidence-based and democratically accountable. I therefore urge the Minister and noble Lords to support this amendment as a modest but essential safeguard for one of the most important pillars of any enforcement regime: the right to appeal.

In conclusion, the amendments we have brought forward in this group are united by a common theme: the need to balance effective enforcement with clarity, fairness and oversight. We recognise the importance of rooting out fraud and protecting the public purse. We support the Government’s efforts to ensure that those who abuse public funds, whether through direct claims or the encouragement of others, face appropriate consequences. However, our concern and the focus of these amendments are to ensure that, in pursuing that goal, we do not sacrifice the core principles of accountability, due process and democratic scrutiny.

Amendment 63A ensures that we face the modern reality of fraud facilitation head on, by clearly defining what it means to “help” to commit fraud. In doing so, it brings much needed clarity and enables enforcement agencies to act against those who profit from spreading dishonest tactics.

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

My Lords, these amendments all pertain to the scope, application and oversight of the civil penalties measures. The measures have been designed using established cross-government best practice so that the PSFA may effectively deter and recuperate money lost to fraud and include numerous safeguards for individuals and businesses.

I find myself in the unique position, so far in this Committee, of agreeing with the noble Baroness, Lady Fox, although maybe not for the reasons that she set out, on Amendment 63A, which would unnecessarily extend the legislation by adding a definition of “help” to Clause 50. The Fraud Act 2006 establishes the fraud offence, which includes an individual making

“a gain for himself or another”.

The Fraud Act does not define “help” in terms of making a gain for another. This is because the Act focuses on the “dishonest intent” of a fraudulent act. Under Clause 70(1)(c), the offence at common law of conspiracy to defraud is already punishable under the Bill. Clause 70(1)(b) includes and covers Sections 6 and 7 Fraud Act offences. This allows for penalties to be issued against the fraud “influencers” we have already discussed during the Bill’s passage. The offence at common law of conspiracy to defraud is also already included in our definition of fraud. It is therefore unnecessary to define “help” in order to use either the Fraud Act or this Bill, although I was very tempted to quote Beatles lyrics—that may just be the time of day.

Amendment 63B would amend Clause 52 by replacing the Minister with the First-tier Tribunal in cases where a fraudster attempts to take public money but is stopped before they receive the payment. There is existing precedent for not using the First-tier Tribunal as the first-instance decision-maker: for example, in the Home Office for the employment of illegal workers. The legislation also includes the right to appeal a decision to the appropriate court following the receipt of a final penalty notice—I will come on to that.

Amendment 63C seeks to broaden the requirement of Clause 58(4) beyond Clause 58(2)(c) so that it may apply to Clause 58(2)(a) and Clause 58(2)(b). This is unnecessary, as Clause 58(3) already requires the Minister to give notice to an individual if the penalty is upheld. While I recognise its intent, it is unnecessary to include Amendment 63D in the Bill. While there is no obligation under common law to provide an explanation for a positive decision—that is, to amend or cancel the penalty—authorised officers will do so as part of the review process. They will also provide an explanation for a decision to amend or cancel the penalty as part of the review process. The civil penalties code of practice and further guidance will support authorised officers.

Amendment 64A would add additional unnecessary complications to the legislation. It is the intent of the legislation not that regulations may be made to reduce or abolish the appeals provisions for penalty notices but that any further regulations may improve, streamline or make the appeal process more efficient. For example, appeals for civil penalties may be heard at the same time as appeals against debt recovery notices.

I turn to the specific points raised by noble Lords. In response to the noble Baroness, Lady Finn, I remind the Committee that the tribunal appeal is already in the process at a later stage, that of determining the penalty. Bringing the tribunal in earlier would add time and burden. I think that I have covered the other points in my speech, and the noble Baroness, Lady Finn, will remind me if I have not—she may be about to—but I hope that my explanations reassure noble Lords and that the noble Baroness will therefore withdraw her amendment.

[Baroness Finn (Con)]

I thank the Minister for giving answers to most of my questions, even if they were not entirely to our satisfaction. In closing, I return to the central purpose of this group of amendments: to ensure that the enforcement powers granted under this part of the Bill are clear in scope, fair in operation and subject to meaningful oversight.

Before I continue on to the other amendments, I will address the concerns of the noble Baroness, Lady Fox. The Minister states that the existing law is sufficient, but there is quite a lot of evidence, and anecdotal evidence, that sickfluencers, as they are called—sick influencers—are active and busy. How many people have ever been pulled up or—

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

This is a point where I should say that there are two parts of the Bill. I am sure that, as Committee progresses, we will discuss sickfluencers. This part of the Bill is making sure that the PSFA has the powers to deal with similar online influencers—I do not think we can call them sickfluencers in relation to fraud—who are leading the charge. Obviously, the PSFA is seeking new powers and we hope to be able to use them. Therefore, I cannot provide the noble Baroness with the data for what prosecutions may or may not have been made up until this point. But we hope that, with new powers for the PSFA, that will be part of the work going forward.

[Baroness Finn (Con)]

I thank the noble Baroness. When we were seeking to introduce this definition of “help”—I take on board the concerns of the noble Baroness, Lady Fox—we were trying to presage the fact that this would come up in a later part of the Bill. I deliberately, in my opening remarks, did not reference sickfluencers, but the noble Baroness, Lady Fox, obviously understood where I was going with that. I am just not convinced about how effective the law currently is in this area.

Our other amendments respond directly to the challenges posed by modern forms of fraud and the expanding reach of administrative enforcement. Whether we are seeking to define what it means to help commit fraud in an online age, requiring that penalties based on hypothetical harm are assessed by an independent tribunal or ensuring that decisions and processes are explained clearly to those affected, these are not procedural niceties; they are essential guarantees of accountability and trust. We cannot afford to leave grey areas for those who seek to exploit the system from the sidelines and we also cannot allow the exercise of significant powers, particularly those that impact people’s livelihoods, to proceed without checks, explanation or independent scrutiny.

This group of amendments does not frustrate the aims of the Bill; it strengthens the Bill. It ensures that public funds can be protected in a way that is not only effective but proportionate, just and transparent. We are asking for three simple things: definitions that are clear so that enforcement can be targeted where it is needed most; penalties subject to oversight, particularly when no actual loss is concerned; and decisions and appeals processes that are robust, explainable and open to democratic scrutiny. These are reasonable, moderate and constructive proposals. They do not undermine the Bill’s purpose; they help it to stand on firmer constitutional and ethical ground. I urge the Minister and all noble Lords to consider them seriously and to support a set of changes that would not only improve this legislation but help to secure public confidence in the integrity of its application. On that basis, I beg leave to withdraw the amendment.

Amendment 63A withdrawn.

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[Baroness Bennett of Manor Castle]

I will stay sat down.

[Baroness Finn (Con)]

My Lords, while I recognise the concerns that underpin this amendment in the name of the noble Lord, Lord Palmer, it is both unnecessary and potentially duplicative, given the extensive scrutiny already taking place through existing and robust channels, as my noble friend Lady Coffey made clear. First and foremost, we must acknowledge that a comprehensive public inquiry is under way into the Government’s response to the Covid-19 pandemic. That inquiry, established under the Inquiries Act 2005 and chaired independently, has broad terms of reference, including examination of procurement processes, ministerial decision-making and the use of public funds. The amendment risks pre-empting, duplicating or even undermining that process by imposing a parallel and more narrowly framed exercise before the formal inquiry has concluded its work.

Let us be clear: the Covid-19 pandemic presented an unprecedented national emergency. Ministers, civil servants and public bodies were called on to make swift, high-stakes decisions in the face of an unfolding crisis. They did so with little warning, under extraordinary pressure and with the primary objective of protecting lives and livelihoods. In that context, decisions were taken at pace to ensure that vital supplies were sourced, support was distributed rapidly, and services could continue to operate. Was the system perfect? No—but to assume that those who contributed to the effort to tackle Covid were doing so for malign reasons is inaccurate. However, that is not to say that we should not seek to recover money where errors were made, and it is of course right that we take steps to realise this outcome, which has been the guiding principle of all our engagements with the Bill: public money should be recovered.

We should therefore make full use of the mechanisms that already exist to assess and recover losses. The National Audit Office, the Public Accounts Committee and internal departmental review bodies have all examined pandemic-related spending and made a series of recommendations, many of which are already being implemented. Indeed, the Public Sector Fraud Authority continues to track and pursue recoveries on this matter. To impose an additional reporting requirement through the Bill, especially one that compels Ministers to publicly acknowledge failings before the full picture is known, would not serve the cause of accountability; rather, it risks creating a politicised and partial process, which may generate more heat than light and overlap confusingly with the broader inquiry now under way.

Let us not lose sight of the bigger picture. The Bill is about strengthening the framework to combat public sector fraud going forward; it is not the right vehicle for relitigating decisions taken in the darkest days of a national emergency. The public inquiry will give us the full breadth and depth of insight that is needed, with the benefit of time, evidence and impartial examination. In the meantime, let us not cast unfair aspersions on public servants and Ministers who, in the face of enormous uncertainty and unimaginable pressure, acted on the whole with integrity, urgency and a profound sense of duty.

I urge noble Lords to recognise that the proper process is already in place and that we must allow it to do its job without prejudging its conclusions. For these reasons, I respectfully oppose the amendment.

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

My Lords, I find myself agreeing with the sentiment behind the amendment in the name of the noble Lord, Lord Palmer. The Government are committed to investigating and combating cases of fraud and error in Covid-19 spending. If I touch on some of the things that the Government are already doing, perhaps he will be reassured that we are already taking this seriously.

The Bill will give the Public Sector Fraud Authority powers to conduct investigations, levy civil penalties and recover money. It also doubles the time limit for civil claims against Covid fraud from six to 12 years to ensure that we can continue to investigate. Although the proposed amendment to mandate a report on public sector fraud during the Covid-19 pandemic underscores the importance of accountability, it is unnecessary given the existing frameworks already in place. The question is whether appropriate reporting processes on Covid-19 spending have already been established—and I would argue that they have.

A dedicated Covid Counter-Fraud Commissioner has already been appointed to review losses of public money to fraud, error and underperforming contracts during the Covid-19 pandemic. Working collaboratively with departments and agencies such as the Public Sector Fraud Authority, His Majesty’s Treasury and the Department of Health and Social Care, the commissioner is focused on public funds lost to fraud, error and underperforming contracts during the Covid-19 pandemic.

The commissioner’s remit includes: assessing recovery efforts to date to determine where additional recoveries can be made and ensuring they are vigorously pursued; ensuring that maximum recovery efforts have been made and providing assurances on this to the public and Parliament; reviewing individual contracts to provide additional attention and reassurance on spending that is disputed; and, from this work, generating lessons and making recommendations for the future. By placing this responsibility with an expert dedicated commissioner who reports directly to the Chancellor and works in close co-ordination with key departments, the Government have ensured a clear and strategic approach to addressing pandemic-related fraud.

Given the breadth and focus of this work, introducing an additional ministerial reporting requirement would be duplicative and could divert resources away from ongoing recovery efforts. It risks creating unnecessary bureaucracy and delaying outcomes. We genuinely believe that the outcome the noble Lord seeks is already in place within government.

To touch on the debate, which was about the wider lessons to be learned from the Covid-19 pandemic, the Bill is specifically about fraud, but I am more than happy to meet the noble Baroness, Lady Bennett, to discuss resilience in the round and the work that the Government are currently doing, as I believe a private meeting would be a more appropriate forum. I hope that that these assurances reassure the noble Lord, Lord Palmer, and that he therefore feels able to withdraw his amendment.

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Moved by

[Baroness Finn]

67: After Clause 65, insert the following new Clause—
“Annual reporting: use of powers(1) The Minister must prepare and publish a report on the use of powers conferred on them under this Part within 12 months of the day on which sections 1 and 2 come into force, and annually thereafter.(2) Any report published under subsection (1) must be laid before both Houses of Parliament within seven days of its publication.”Member's explanatory statement
This amendment requires the Minister to publish an annual report on the use of powers conferred on them by Part 1 of the Bill, which must then be laid before Parliament within seven days of publication.

[Baroness Finn (Con)]

My Lords, our Amendments 67 and 68 in this group work together to introduce new clauses on annual reporting obligations under the Bill: first, on the use of powers conferred by Part 1 and, secondly, on the extent of fraud against public authorities. These are, on their face, modest amendments: they do not alter the structure of the Bill; they do not restrict the powers being granted; and they do not place unreasonable burdens on Ministers or departments. They are grounded in a principle that is both simple and fundamental to good governance: that Parliament and the public have a right to know how powers are being used and whether those powers are making a measurable difference.

Amendment 67 would introduce an annual reporting requirement on the use of powers conferred under Part 1. This part confers significant powers: powers to impose penalties, to recover funds, to compel the provision of information and to act across a broad range of public authorities. These are substantial tools in the Government’s arsenal against fraud and error, and we all agree that public money must be protected and those who exploit or defraud the state must be held to account.

But power must always be accompanied by oversight. The public has a legitimate interest in how these tools are used, how often, in what context and with what effect. An annual report will provide that vital lens of scrutiny. It will allow Parliament to see whether the powers are being exercised proportionately and effectively and whether any patterns or concerns are emerging that warrant further attention. Without such reporting, we risk creating a system where power operates behind closed doors: not necessarily abused, but unexamined; not necessarily misused, but not explained. That, over time, can erode public trust not just in anti-fraud enforcement but in the fairness and accountability of public administration itself.

This amendment would simply require the Minister to prepare and publish an annual report on the use of the powers granted under Part 1, beginning within 12 months of the commencement of Clauses 1 and 2 and continuing annually thereafter. The report must then be laid before both Houses of Parliament within seven days to ensure that this information is not only collected but promptly placed in the public domain.

This is not bureaucratic clutter; it is democratic hygiene. It provides Parliament with the tools that it needs to track the implementation of this legislation and to hold the Executive to account. It allows Select Committees, Members of both Houses and the public to ask informed questions and pursue necessary follow-up, where appropriate.

The second amendment, Amendment 68, complements the first by requiring an annual report on the estimated scale of fraud against public authorities, based on the Government’s internal estimates. We have heard repeatedly, both in this Committee and outside it, that public sector fraud is a serious and growing challenge, yet it remains notoriously difficult to quantify. Estimates vary, methodologies differ and the scale of undetected fraud, by its very nature, is hard to pin down.

Nevertheless, if we are to take the fight against fraud seriously, we must begin by being honest about the scale of the problem. This amendment would compel the Government to do just that—to report annually on their internal estimates of fraud against public authorities and to lay those findings before Parliament. Without a clear sense of the scale of fraud, we cannot effectively assess the return on investment in anti-fraud measures, we cannot identify which sectors are most at risk and we cannot hold departments to account for their own controls and responses.

Just as importantly, regular public estimates create pressure for improvement. When departments know that the levels of detected or suspected fraud will be publicly disclosed, they have a strong incentive to strengthen internal controls and to invest in fraud detection systems. The result is not only transparency but improvement in practice. This principle speaks to the heart of another one of our goals: that public authorities take increasing responsibility and ownership for identifying and tackling fraud internally. This amendment is a mechanism that would promote this.

It is worth emphasising that this amendment does not require, unfortunately at present, perfect precision. It does not ask the Government to do what is not feasible; it asks for a summary of internal estimates informed by the Government’s data, audits and risk assessments. That is both reasonable and achievable. However, I take this opportunity to call out that data should be improved. The variances in the estimates currently produced by the Government are massive, and it is clear that the Government themselves do not have a particularly accurate view of the challenge that we face. The Government must achieve more accurate data reporting in this area and make this available. We need to strive for a situation in which good, accurate data is provided to Parliament, not the wildly varying estimates that we currently see.

Ultimately, we cannot allow the state to hide behind averages, yet that is precisely what it does. It is all too easy for the Government to delay publication of the annual fraud landscape report; when it does appear, it risks being only the most convenient version of the truth—aggregated figures, smoothed-out estimates and numbers stripped of detail with no departmental breakdown, timeline or accountability. That is not transparency; it is evasion. A Government who lose billions to fraud cannot be allowed to drip-feed the facts on their own terms.

Together, these two amendments serve a broader purpose. They ensure that this legislation not just empowers the state to act but commits the state to account for how it acts and to explain whether its actions are having the intended effect. They are not burdensome or oppositional; they are the kind of clear, regular reporting obligations that should be part of the design of any legislation that grants wide-ranging enforcement powers and seeks to solve systemic problems. Let us remember that the effectiveness of anti-fraud efforts cannot be judged solely by the strength of powers on paper; it must be measured by their use in practice and by the visibility of that use to those whom the powers are ultimately meant to serve—the taxpayer and the public.

Transparency is not a hindrance to enforcement; it is an essential condition of its legitimacy. These amendments would not hinder the Government’s ability to act. On the contrary, they would enhance its credibility in doing so. They would signal to the public that the Government are not only determined to tackle fraud but willing to be open about their efforts and accountable for their progress. They would allow Parliament to play its rightful role in monitoring implementation, asking the right questions and proposing further refinements when necessary. In an age when public trust in institutions must be earned and re-earned, these small acts of transparency are the building blocks of that trust.

I urge the Minister and noble Lords across the Committee to support these amendments as practical, principled and proportionate contributions to a more transparent and effective anti-fraud regime. I beg to move.

[Lord Palmer of Childs Hill (LD)]

My Lords, these amendments are very close to my party’s heart. I warmly welcome Amendments 67 and 68, which would place an important emphasis on transparency and accountability by requiring the Minister to publish annual reports on the use of powers under Part 1 of the Bill, as well as on the estimated scale of fraud against public authorities. Too often, no one knows about the scale.

These measures represent a vital step forward in ensuring that Parliament and, by extension, the public, receives regular, detailed information about how these powers are exercised and the ongoing challenges faced in tackling fraud. Such openness is essential because it is openness that solves these problems, builds trust in the administration of public funds and allows for informed scrutiny and debate. From my party’s perspective, these amendments align closely with our long-standing commitment to open government and evidence-based policy-making. By mandating annual reporting, they would help to illuminate the practical impact of the Bill and provide the data that is necessary to assess whether these powers are effective, proportionate and fair. This ongoing oversight will be invaluable in refining approaches to fraud prevention and recovery and ensuring that public authorities are both empowered and held accountable.

I look forward to supporting these amendments as the Bill goes forward, as well as to continuing to work to strengthen transparency and public confidence in this important area.

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

My Lords, I am more than happy to write to the noble Viscount.

[Baroness Finn (Con)]

My Lords, I thank the Minister for her response. In closing this group, I return to the central theme that underpins Amendments 67 and 68: that transparency is not an optional extra in the fight against public sector fraud but an essential condition of legitimacy, accountability and effectiveness. We are granting significant powers under the Bill, powers to recover, to penalise and to compel, but the exercise of those powers must not exist in a vacuum. The public, and indeed Parliament, must be able to see how those powers are being used and whether they are making a real, measurable difference.

Amendment 67 would ensure that the use of these new powers is reported on annually. It would allow us to track how these tools are deployed, where they are having an impact and where further improvement or scrutiny may be required. It would give Parliament, committees and the public a vital feedback loop, not to micromanage but to hold the system to account and ensure that it continues to serve its intended purpose.

Amendment 68 would complement that by shining a light on the scale of the challenge itself. If we are to treat fraud with the seriousness it demands, we must start by being clear-eyed about the extent of the problem. I am sure that internal estimates are already being produced within government; this amendment simply asks that they be published regularly and in good faith, so that we can judge our progress, measure impact and direct resources more intelligently.

I take the point the Minister made about the estimates ranging from 0.5% to 5%, but I am sure she will agree that, given the enormous amounts of these figures, that that 0.5% to 5% is a rather wide range of figures of billions of pounds. Would she like to expand on that and give me what the actual amounts in 0.5% to 5% might be?

[Baroness Anderson of Stoke-on-Trent]

It is suggested to me that the actual amount, as touched on by the noble Viscount, is at least £55 billion, but I will be writing to all members of the Committee who are present.

[Baroness Finn (Con)]

I thank the noble Baroness for her answer. Is that the 5% or the 0.5%? Anyway—

These amendments would not add bureaucracy for bureaucracy’s sake. They would build confidence, encourage departmental responsibility and improve operational performance. They would not be constraints on ministerial power, but a scaffolding of legitimacy around its use. Crucially, they would reflect the truth that we have heard echoed throughout the passage of the Bill, that public trust is hard won and easily lost. If we are to strengthen that trust, we must show not only that we are serious about tackling fraud but that we are equally serious about demonstrating how we are doing so and being accountable for the results.

Once again, these are reasonable, proportionate and practical amendments, and I hope the Minister will reflect on them not as additional burdens but as meaningful opportunities to improve the transparency, responsiveness and long-term success of this legislation.

I emphasise that I am not being a total nuisance in pushing on the quality of data. It is not a new phenomenon; I spent many years in the Cabinet Office tearing my hair out about the quality of data. The one thing that I learned when I was working for the noble Lord, Lord Maude of Horsham, when he was the Minister in the Cabinet Office, was that the quality of the data improves by greater transparency. I just make that point; it is not a criticism of the Government, but a criticism of the data process within government.

In conclusion, I urge noble Lords across the Committee to support the principles in these amendments and, in so doing, to support the kind of open and accountable government that underpins any effective public policy. I beg leave to withdraw my amendment.

Amendment 67 withdrawn.

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Moved by

[Baroness Finn]

68A: Clause 66, page 35, line 9, at end insert—
“(A1) Investigatory and enforcement powers under sections 3 (information notices), 7 (entry, search and seizure powers), 17 (direct deduction orders), and 38 (deduction from earnings orders) of this Act shall not be exercised except as provided for in this section.”Member’s explanatory statement
This amendment, together with others to this Clause in the name of Baroness Finn, would ensure greater ministerial and parliamentary oversight when the powers provided for in this Bill are exercised by authorised officers on behalf of the Minister for the Cabinet Office.

[Baroness Finn (Con)]

My Lords, our amendments in this group seek to ensure accountability, oversight and the responsible exercise of powers under this part of the Bill. We have heard a great deal about the importance of tackling fraud, but powers alone do not constitute a policy. What matters is how those powers are used, by whom and under what form of oversight. In the current draft of the Bill, those questions are either ignored or answered in ways that place too much discretion in the hands of too few officials with too little scrutiny. It confers far-reaching authority: powers to compel private financial disclosure, to seek warrants for entry and seizure and to deduct directly from earnings or bank accounts. Yet these powers are not tethered to ministerial decision; they are to be exercised by civil servants of no higher rank than that of a higher executive officer, without public record or the consent of Parliament.

Amendment 68A seeks to begin to correct this. It would draw a clear line in statute that no investigatory or enforcement power of this kind may be exercised unless the conditions set out in the new clauses are met. This is the legal threshold that the original Bill failed to define. It would prevent the casual use of extraordinary authority and ensure that the powers granted are used only under procedures that meet the standards expected in a democratic state. Indeed, this amendment goes to the heart of a fundamental principle: where Parliament grants the Executive new and significant powers, particularly powers that interfere with individuals’ rights, privacy or property, those powers must be subject to robust oversight, clear safeguards and direct ministerial accountability.

Clause 66 deals with authorisation—that is, how investigatory and enforcement powers conferred by this legislation are to be exercised and by whom. But, as currently drafted, the clause does not go far enough to ensure that these powers are exercised only within the bounds of proper oversight and democratic legitimacy. Our amendment would make that explicit. It states that:

“Investigatory and enforcement powers”,


specifically those under Clauses 3, 7, 17 and 38,

“shall not be exercised except as provided for in this section”.

In other words, Clause 66 would become the gatekeeper. The amendment would make it clear that powers cannot be exercised by default; they must be authorised and controlled in line with the procedures set out by Parliament.

These are substantial powers. In the right hands, they may be justified to combat fraud, but without proper controls they are powers ripe for misuse or, at the very least, for eroding public trust in the system, and that is why this amendment is necessary. It would draw a clear line in statute that these powers must not be exercised outside the confines of Clause 66. It would anchor the use of those powers in a transparent and accountable framework, where Parliament and Ministers remain answerable for how they are applied.

Furthermore, it would ensure that responsibility for these powers remains with the Minister for the Cabinet Office—a Minister of State answerable to this House and the other place—and that they are not simply delegated indefinitely to a body of authorised officers operating with limited scrutiny or constraint. This amendment would not obstruct the Government’s efforts to recover public funds lost to fraud. It would ensure that, in pursuing that goal, we do not short-circuit the vital checks and balances that underpin good governance.

We have seen in other contexts what happens when enforcement powers are granted without sufficient parliamentary guard-rails: mistakes are made, trust is lost and legal challenge follows. This amendment is designed to avoid that fate by ensuring that Parliament retains a hand on the tiller and that those acting in the name of the state do so under lawful, accountable and proportionate authority. It is a modest and constructive amendment, but it speaks to a bigger principle: the rule of law demands not only power but control, not only action but accountability.

Amendment 68B works in the same spirit as Amendment 68A in locking in ministerial oversight and a clear line of accountability when these powers are used. It requires that the most serious powers—those involving seizure of property, disclosure of personal finances or deductions above £10,000—must be explicitly authorised by a Minister of the Crown. That is not bureaucracy but responsibility. It makes Ministers answerable for the exercise of power in their name. For lesser powers, the amendment requires sign-off by a senior civil servant—no longer a junior official, invisible and unaccountable.

The amendment then goes further still. It compels the Public Sector Fraud Authority to maintain a public register of every instance that these powers are used: who authorised them, when they were used and why. The register must be laid before Parliament. The result is not an illusion of scrutiny but real institutionalised oversight. This amendment seeks to introduce three essential safeguards. The first is ministerial sign-off for the most intrusive or high-stakes enforcement actions. The second is senior Civil Service oversight for all other investigatory powers under this legislation. The third is the creation of an annual publicly accountable register detailing when and how these powers are used.

Let us be clear: the Bill grants significant new powers to officials, including the ability to compel disclosure of personal financial data, to enter and search private premises, and to order the direct deduction of funds from individuals’ bank accounts or wages. These are not powers to be taken lightly; they go to the heart of personal privacy, financial autonomy and, potentially, due process. We have mentioned this a lot during these days in Committee, but we must always remember that these are real powers that will be used against real people in the near future.

Under this amendment, certain especially intrusive powers, such as requiring disclosure of personal financial records, applying for search and seizure warrants, or imposing deduction orders above £10,000, would require explicit approval from a Minister of the Crown. That is not bureaucracy for bureaucracy’s sake; it ensures that decisions with the potential to impact individuals lives in a profound way are not made lightly or by junior officials acting in isolation. This is a proportionate safeguard. It does not stop these powers being used, but it ensures that they are used only when a Minister is satisfied that the action is lawful, necessary and justified—and, crucially, is willing to stand behind that decision in Parliament if challenged. This line of accountability is vital for proper oversight, but it also protects the Minister.

Given the extent and scale of the powers we are discussing, civil servants operating in the name of the Minister but without their knowledge or explicit authorisation is not a responsible set-up. When decisions of this influence are being made on behalf of the Minister, it is also, for the Minister’s sake, vital that they have oversight of what is being done in their name. With this amendment, we avoid the possible scenario of a Minister being hauled before a committee or inquiry and being asked to justify actions of which they had no knowledge. This is important for oversight and accountability, but it is also surely a protection that the noble Baroness would welcome.

For all other enforcement powers, the amendment would require authorisation by an official at senior Civil Service grade or above. This ensures that decisions are taken not at a junior level without experience or understanding of the risks involved but by someone who can weigh up the public interest, the risks of error and the rights of the individual. This is a safeguard that ensures that decisions of this gravity are, rightly, taken by those with experience, and it prevents junior civil servants from falling victim to genuine mistakes that, regardless, have life-altering impacts for those affected.

The third part of this amendment proposes something equally important: a transparency register maintained by the Public Sector Fraud Authority. This register would document the use of these powers, who authorised them, when and on what grounds, and it would be laid before Parliament annually. This is not just an administrative measure but a mechanism of democratic scrutiny. It allows Parliament and the public to see how often these powers are used, by whom and with what justification. It helps to ensure that the powers are used proportionately, not indiscriminately. It provides a deterrent against misuse and it strengthens the legitimacy of the very fraud prevention system we are seeking to bolster.

I support the Government’s ambition to tackle fraud and error in the public sector but, in doing so, we must never forget the old truth: power without accountability breeds mistrust. If we are to ask the public to accept stronger enforcement powers, we must meet that with stronger transparency and oversight. This amendment does just that. It enables action but ensures that action is always tied to accountability. It protects individual rights while enabling the state to recover public money. Above all, it reflects the principle that, where significant powers are exercised by officials, someone at the highest level must be answerable for their use.

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My interactions with the officials at the PSFA have been extraordinarily professional. The calibre of the people whom we are talking about and asking to do this work is high, and I am proud that they will be doing it in the name of the Government. I hope that this explanation reassures noble Lords and that they therefore do not press their amendments.

[Baroness Finn (Con)]

I thank the noble Baroness for her response. In closing, I will return to the core proposition that underpins the three amendments that we have brought forward in this group, that the legitimacy of power lies not in its breadth but in its accountability. The Bill seeks to equip the Government with the means to tackle a serious and evolving threat to the public purse, but the scale and sensitivity of the powers it confers demand that we legislate not only for action but for responsibility. I am very grateful for the support of the noble Baroness, Lady Fox, and the noble Lord, Lord Palmer.

I will correct one thing before I continue. I did not mean to imply that I do not trust relatively junior officials to exercise these far-reaching powers properly. The nature of what I am concerned about, and what these amendments seek to address, is the accountability of those civil servants for their actions to the Minister and therefore to Parliament. I am concerned that not enough direct accountability is built into the PSFA. I know we referenced the independent reviewer, but the independent reviewer is looking at the actions afterwards and is not directly accountable to the Minister for the actions of the officials. We are all aware of what happened with the Horizon scandal, and it is that sort of that scenario that we are seeking to avoid.

Amendment 68 would establish a clear statutory foundation for the exercise of investigatory and enforcement powers, ensuring that these are not left to broad discretion or quiet delegation but are explicitly bound by the structures and intentions set out by Parliament. That clarity matters. It protects the integrity of the system but also protects those within it from the charge, or the risk, of acting beyond their mandate.

Amendment 68B would strengthen that structure by ensuring that certain intrusive or high-stakes decisions are subject to senior oversight, and that those decisions are visible to Parliament and, where appropriate, to the public. It is a safeguard for the individual, but also a protection for Ministers, who ought not to be asked to account for actions they neither authorised nor even knew of. The transparency register it proposes is not simply a record-keeping tool but a mechanism of democratic accountability and a signal to the public that these powers will not be exercised in darkness.

Amendment 68C would complement both previous amendments by insisting on professionalism. It asks, quite reasonably, that those entrusted with powers to investigate, search, seize and compel be qualified to do so. These are serious, often life-altering powers; they must be wielded by people who understand not just the legal thresholds but the ethical and human responsibilities that come with them.

Together, these amendments would provide the structure and safeguards that the Bill so plainly lacks. They do not remove powers; they make those powers defensible. They do not oppose the work of the Public Sector Fraud Authority but would give it legitimacy. If Parliament is to authorise intrusion into personal records, entry into homes, seizure of property and the imposition of financial penalties, it must be satisfied that those powers are used lawfully, proportionately and by people who are properly trained to use them. These amendments are not decorative; they are the minimum requirement for a just and serious law.

The state must be equipped to confront fraud, but it must do so in a way that preserves trust in the institutions it seeks to defend. That trust is not automatic; it is earned through transparency, proportionate action and clear lines of accountability. These amendments offer a constructive, proportionate and carefully designed way to embed those principles into the fabric of the Bill. They do not oppose the Government’s aims; they reinforce them by ensuring that enforcement is not only strong but legitimate in the eyes of those it affects.

When we grant the Executive the tools to act on our behalf, we also assume the duty to ensure that those tools are used wisely, lawfully and with proper scrutiny. These amendments are our opportunity to meet that duty, and I urge the Minister and noble Lords across the Committee to support them. I beg leave to withdraw.

Amendment 68A withdrawn.

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Moved by

[Baroness Finn]

68D: After Clause 68, insert the following new Clause—
“Fraud risk management duties for public authorities(1) This section applies to public authorities responsible for spending schemes or programmes involving total annual payments or disbursements exceeding £100 million (“relevant spending schemes or programmes”).(2) A public authority to which this section applies shall—(a) register each relevant spending scheme or programme with the Minister for the Cabinet Office via the Public Sector Fraud Authority before the start of each financial year;(b) conduct and submit to the Authority a fraud risk assessment for each registered scheme, detailing identified fraud risks and planned mitigations;(c) prepare an annual fraud measurement plan specifying the methods by which fraud rates will be determined, including representative sampling or comparable statistically valid methods, to ensure robust estimation of fraud and error rates.(3) The Authority shall—(a) independently verify each public authority’s reported fraud rates annually, employing rigorous audit, sampling, or comparable statistically robust methods;(b) publish annually, in a dedicated report laid before Parliament—(i) the fraud rates reported by each public authority;(ii) the independently verified fraud rates determined by the Authority;(iii) an assessment of the accuracy and effectiveness of each public authority’s fraud risk management measures.(4) Each public authority shall publish in its annual accounts—(a) its submitted fraud risk assessment;(b) the fraud rates as determined independently by the Authority;(c) an evaluation rating (Red-Amber-Green) assigned by the Authority reflecting the public authority’s compliance with and effectiveness of its fraud risk management duties.(5) The evaluation rating assigned by the Authority under subsection (4)(c) shall assess—(a) adequacy and accuracy of fraud rate measurement methodologies;(b) effectiveness of implemented fraud risk mitigations;(c) compliance with statutory duties set out in this section.(6) Where the Authority finds significant discrepancies between reported fraud rates and independently verified fraud rates, or otherwise finds significant inadequacies in the public authority’s fraud management practices, it shall issue a notice requiring the public authority to—(a) submit within 30 days a detailed action plan specifying corrective measures;(b) implement corrective measures as directed by the Authority within a timeframe specified in the notice.(7) Compliance by public authorities with their obligations under this section shall be subject to audit by the Comptroller and Auditor General, and the findings shall form part of their reports to Parliament.”Member’s explanatory statement
This new Clause seeks to impose stricter fraud risk management duties on public authorities that oversee spending schemes exceeding £100 million annually, by requiring these authorities to register schemes, conduct fraud risk assessments, measure fraud using robust methods, and publish findings. The Public Sector Fraud Authority would verify reported fraud rates, publish comparisons, assign performance ratings, and enforce corrective actions for poor performance. Compliance would be subject to independent audit and parliamentary scrutiny.

[Baroness Finn (Con)]

My Lords, if Amendment 68 demands that the Government publish the scale of the fraud, Amendment 68D goes further. It would require public authorities to understand where fraud risks actually lie. Without that, any national figure is a guess: unverified, unanchored and easily manipulated.

The reason that this matters is not theoretical. It has already gone wrong. HMRC once claimed that just 3.6% of R&D tax credit claims involved error or fraud. After proper scrutiny, the truth emerged: 16.7% of all claims were in fact fraudulent or incorrect, costing the taxpayer over £1.1 billion a year. This was not an isolated failure. The National Audit Office found that of 63 official fraud and error assessments conducted since 2014, nearly half were unreliable. That covered £224 billion of public spending. No Government can claim to be serious about fraud while tolerating this level of ignorance in their own accounts.

Amendment 68D would stop all that. It would impose specific legal duties on every public body that spends more than £100 million a year. It would introduce a new clause placing clear, enforceable fraud risk management duties on public authorities responsible for major spending programmes. It would set out a practical and proportionate framework for improvement in the Bill, improving fraud risk management in public authorities and allowing clearer oversight of how departments are working to counter fraud in their own operations. This builds on the principle that we made clear on the first day in Committee: that the Bill should encourage public authorities l to develop their own counter-fraud capabilities and cultures. The PSFA should be a mechanism through which this process is facilitated, not offloaded.

Our amendment seeks to further incorporate this purpose in several ways. First, it would introduce a registration requirement. All public authorities overseeing schemes with annual disbursements over £100 million would be required to register those schemes with the Public Sector Fraud Authority at the start of each financial year. This would ensure visibility and that large, high-risk schemes do not fall through the cracks. Secondly, it would require each public authority to assess fraud risks involved and submit those assessments, which would be a detailed analysis, to the Public Sector Fraud Authority. This practice would work to further a public authority’s appreciation for the risks it faces and the measures it is obliged to take, and would share out the workload of the PSFA by allowing risks to be identified early and early intervention to occur.

Thirdly, the amendment would require authorities to prepare an annual fraud measurement plan, using statistically valid methods, not guesswork or unverified assumptions. If we are serious about reducing fraud, we must be serious about measuring it properly. What gets measured gets managed.

Fourthly, and crucially, the amendment would give the Public Sector Fraud Authority the power to independently verify each public authority’s reported fraud rates and to publish its findings side by side with the authority’s own figures. That transparency is vital. Parliament and the public deserve to know not only what departments say about their fraud levels, but what an independent review actually shows. It must evaluate the quality of the public authority’s fraud risk controls, and then assign them a green, amber or red rating. These ratings will need to be published annually in each authority’s accounts. This drives accountability and allows Parliament to see at a glance where strong practice is in place and where urgent action is needed. When there are significant discrepancies or poor performance, the amendment would empower the authority to require corrective action and brings in the Comptroller and Auditor-General to provide independent audit and scrutiny.

This is about embedding a whole-system approach to risk, from the point of registration to external audit. This holds public authorities to account not only for the fraud they suffer, but also for the action they take to identify and prevent it. These are clear and reasonable demands, and they should be welcomed by the Minister as a complementary system which would make the work of the PSFA easier and more effective.

This is not red tape; this is basic stewardship of public money. If a private sector organisation with £100 million in outgoings failed to properly assess risk, measure loss or independently verify results, we would call it negligence. Why should the public sector be held to a lower standard? This amendment offers a road map to real improvement, not through centralisation or command and control, but through transparency, accountability and independent oversight. It would create a clearer line of sight from fraud risk to fraud response, helping us to target prevention, improve data and strengthen public confidence.

In conclusion, Amendment 68D seeks to deliver something that the Bill must ultimately be judged by—not the breadth of powers granted to central government but the clarity and strength of the systems we put in place to prevent fraud in the first place. This amendment is not about adding burdens; it is about embedding responsibility. It would ensure that public authorities responsible for large-scale spending schemes take ownership of their fraud risks and are held accountable for how they assess, monitor and manage them.

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

My Lords, tackling public sector fraud is a foremost priority for this Government. Amendment 68D raises interesting points. It seeks to put some of the work that the PSFA does with departments and public bodies to improve their management of fraud on a statutory basis, and to explicitly have it cover all government schemes or programmes over £100 million.

While we have been debating the fraud investigation activities of the Public Sector Fraud Authority, for which we believe there is a very strong case, we have understandably not given as much time to the wider responsibilities the PSFA already holds, as detailed in its published mandate—which is wonderful bedtime reading, as per my theme; I like to give bedtime reading on each day in Committee. This is not part of the Bill, but it might be useful for noble Lords if I spend a moment to update the Committee on the other work of the PSFA.

The PSFA works with departments to improve their understanding of fraud and to improve their action on the risk of fraud through a range of modern techniques. Fraud investigation is, of course, only one part of this. Alongside this, public bodies need effective capabilities to understand and reduce the risk of fraud, through tools such as fraud risk assessment and fraud measurement, which this proposed amendment covers, and also through intelligence, fraud prevention, deterrence, process design, the use of data and analytics, fraud detection and the shaping of an organisation’s culture.

I would like to set out some key principles around how the Government approach fraud risk. Accounting officers within departments are responsible for managing public sector organisations’ risks, including fraud. Each organisation faces a range of fraud risks specific to its business, from internal and external sources. Managing Public Money—also a fascinating read—already sets out that, for any new major area of spend with high fraud risk, departments shall assess the risk of and impact from fraud at the outset. This identifies the potential for fraud and the different impacts that fraud could have for the spend area.

In high-risk areas, once spending is approved, this results in the development and continued maintenance of a detailed fraud risk assessment. High-risk areas would be the highest areas of government spending where fraud measurements are not yet in place and which have been identified as high risk by a mandatory initial fraud risk assessment process. The PSFA was introduced with a published mandate that openly sets out how it will work with departments and public bodies and what is expected of all parties. Government departments and public bodies must comply with this mandate. The mandate sets out that public bodies must use initial fraud impact assessments, in line with Managing Public Money, submit quarterly data returns on the levels of fraud and error they find and report on their progress against their action plans and key metrics.

Departments and public bodies are also required to ensure that they adhere to the counterfraud functional standard. This is independently assured by the Public Sector Fraud Authority on a rolling basis. The functional standard outlines the expectations for managing counterfraud, bribery and corruption activity. It clarifies the basics that public bodies should have in place, promoting efficient, coherent and consistent management across the public sector. The PSFA’s published mandate enables it to conduct expert reviews on public bodies’ fraud work. To date, the PSFA has reviewed 31 public bodies against the counterfraud functional standard. The PSFA’s mandate also requires it to publish a report on fraud across government annually. This includes the levels of detected fraud and corruption and associated error in departments and public bodies—excluding tax and welfare, as these are published elsewhere. Fraud measurement exercises are used as a tool to understand fraud risk in the highest areas of loss.

The Government have also created a high fraud risk portfolio, in line with the PSFA’s mandate, that details the highest risk areas of government spending where there are not yet fraud measurements in place. The Government decided that schemes on this portfolio should undertake fraud measurement exercises and report these to the centre. This is currently being tested with the current schemes on the portfolio, where it is operating on a “comply or explain” model, enabling us to assess the burden and impact of this approach. The PSFA will continue encouraging and supporting departments to do more targeted measurement. Just last year, the government counterfraud profession launched its first qualification for fraud measurement practitioners.

The amendment also recommends that all the findings are reported to the National Audit Office, in the form of the Comptroller and Auditor General. The PSFA’s mandate already enables the PSFA and the NAO to work very closely to share information on public body performance in dealing with fraud:

“The PSFA will openly and regularly update on its activities and the data it holds to the National Audit Office (NAO). This will include performance data and the compliance with mandatory processes and data requests”.


In addition, this is an area that the Public Accounts Committee has paid keen attention to, and the PSFA has committed to share the high fraud risk portfolio with the committee on reading-room terms.

I hope that the collective measures I have outlined reassure noble Lords that the Amendment 68D would serve only to replicate responsibilities and duties that already exist and that the noble Baroness will therefore withdraw the amendment.

[Baroness Finn (Con)]

My Lords, as we close the debate on this amendment, let us return to first principles. Public money must be protected, not just recovered after it is lost. That protection starts not with more powers but with stronger systems—systems that encourage responsibility, enable scrutiny and reward transparency.

Amendment 68D would be a practical, proportionate step towards that goal. It sets out a clear set of duties for public authorities that manage major spending schemes—duties that mirror the kind of basic risk management we would expect from any serious organisation handling significant funds. It is not, as I have emphasised, about adding layers of bureaucracy but about lifting the standard of governance across government. It is about saying to departments and public authorities, “If you are entrusted with large sums of public money, you must also be prepared to demonstrate how you protect that money from fraud, and you must do so in a way that is transparent, measurable and independently verifiable”.

This amendment is not just good policy; it is good practice. It would ensure that those with front-line responsibility for major schemes understand and own their risk landscape. It would support the PSFA by creating a consistent baseline of risk information and freeing up its capacity to focus on oversight and intervention, rather than firefighting. It would give Parliament and the public a clear view of where fraud controls are working and where they are not.

The red/amber/green system offers not just transparency but motivation. It highlights good performance, surfaces areas of concern and gives departments an incentive to improve. That is how you change behaviour: not by wishful thinking or ministerial Statements but by law. If a department reports low fraud rates and the authority finds something very different, it must act. It must issue a notice, demand an action plan and ensure that changes are made. If no action is taken, the Comptroller and Auditor-General can audit compliance and report to Parliament. That is what proper fraud prevention looks like. It does not wait for the scandal; it creates a system that sees the risk before the damage is done.

Amendment 68D is not an optional refinement; it is the core of the Bill’s purpose restored. Without it, we will once again be left with false confidence, unreliable data and billions lost in plain sight. In short, this amendment is a road map for better practice—one that I believe both Parliament and the Government should support. I beg leave to withdraw.

Amendment 68D withdrawn.

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Moved by

[Baroness Finn]

68E: Schedule 2, page 70, line 28, leave out first “a” and insert “an independent”
Member’s explanatory statement
This amendment seeks to probe the Government’s openness to specifying that the chair of the Public Sector Fraud Authority should be independent.

[Baroness Finn (Con)]

My Lords, our amendments in this group seek to probe the Government on how the PSFA is constituted; they will, we hope, allow some greater clarity on what sort of body the Government are trying to construct. We seem to have a halfway house between an arm’s-length body—an ALB—and an internal team, which fails to meet established appointment practices and to incorporate clear lines of accountability and oversight. I emphasise at this stage that these are probing amendments because I am perplexed about the status of the PSFA—that is, whether it has the status of an executive agency, an ALB or what—and about what the definition might be.

Amendments 68E and 68F seek to clarify that the chair of the Public Sector Fraud Authority should be not merely a non-executive member but an independent non-executive member. This touches on a question that goes to the very heart of the authority’s credibility: who watches the watchdog? The Public Sector Fraud Authority is being established to play a leading role in detecting, deterring and recovering fraud against the public purse. It will hold a range of enforcement powers and a remit that spans across Whitehall and beyond. For such a body to command confidence, not just among Ministers and departments but in Parliament and with the public, it must be seen to operate with integrity and impartiality, and that starts at the top.

This amendment probes the Government’s willingness to state, in the Bill, that the chair of this powerful body must be independent. Here, independence does not mean hostility to government, nor an automatically dissenting voice; it means freedom from internal departmental influence and the credibility to challenge poor practice where it may occur, including within the Cabinet Office itself.

As currently drafted, Schedule 2 states that the Minister is to appoint non-executive members, but that does not guarantee independence. By inserting the word “independent”, this amendment would send a clear signal that the Government recognise the importance of public trust and that scrutiny is not a threat to good governance but a precondition of it. Other public oversight bodies set a useful precedent: the National Audit Office, the office for Budget Responsibility and the Financial Conduct Authority. All of them understand that independence at the top is essential to their authority. If the PSFA is to live up to its remit, particularly when it may need to challenge entrenched practices or politically sensitive departments, then it, too, must have that independent leadership accountable to a Minister who is accountable to Parliament.

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

My Lords, I thank noble Lords for raising the important issues of independence, recruitment, reporting and powers should the PSFA become a statutory body. The purpose of creating a statutory body is to place individual enforcement decisions at arm’s length from Ministers, but we have been clear that, while the PSFA enforcement unit is small, creating a new statutory body is not proportionate, so the Government will not commence Schedule 2 in the immediate future.

The approach in Schedule 2 adheres to published guidance in the Public Bodies Handbook. It follows the same approach used elsewhere, such as Schedule 1 to the Victims and Prisoners Act, which established the Infected Blood Compensation Authority. Amendments 68E and 68F seek to insert “independent” before the description of the chair and non-executive directors. These are ministerial appointments, but I remind your Lordships that the Government have been clear that, should the PSFA be established as a statutory body, its enforcement decisions would be fully independent of the Minister. To ensure this, the chair and non-executives will be public appointments and will follow the Cabinet Office Governance Code on Public Appointments, which is overseen by the Commissioner for Public Appointments. This will ensure that their recruitment is transparent and includes an independent member on the recruitment panel. This is similar in approach to the Infected Blood Compensation Authority, which uses the same legislative language. Amendment 69B seeks to insert words to a similar effect in respect of the chair appointing the chief executive and executive board members, so it is linked to these amendments.

In respect of Amendments 71A and 74B, which seek to remove the Minister’s power to make regulations on the eligibility rules for members of the PSFA and to prevent the PSFA from authorising a person who is not a board member of the authority authenticating its seal, it is important to note these are common provisions in the creation of public bodies. The seal is the means by which the PSFA will be able to enter into deeds and contracts, such as leasing property, and authenticating the seal just means signing next to it to show that the deed has been approved. Although authentication would usually be done by a board member of the PSFA, we have built in a degree of flexibility so that it can be delegated, for instance to its legal officers, should the need arise. As noted, the Infected Blood Compensation Authority and other public bodies such as the independent monitoring authority, established in the European Union (Withdrawal Agreement) Act 2020, have similar provisions. They serve to improve the efficacy and administrative efficiency of such public bodies.

As to Amendments 74C and 74D, which would see the Minister retain responsibility for the exercise of functions in the Act after they have been extended to the PSFA, and Amendment 69A, which would make the chief executive and other executive members’ ministerial appointments, I refer your Lordships to my earlier point. One essential reason in setting up the PSFA as a statutory body would be to remove any perception of potential political interference. These amendments would be counter to that policy intention.

Finally, Amendment 74A would require the PSFA to publish its annual report within three months of the end of the financial year. The Bill currently stipulates, in paragraph 12 of Schedule 2, that this should be as soon as reasonably practicable after the end of each financial year. That is for good reason. The accounts will need to be reviewed by the Comptroller and Auditor-General, whom we would then need to commit to this timeline. Additionally, Erskine May, our own guidance on reporting, notes that accounts, together with an NAO report, must be laid no later than the following January. A statutory PSFA would follow Erskine May, as well as His Majesty’s Treasury’s guidance on Managing Public Money and the annual Government Financial Reporting Manual, to ensure that its report follows best practice.

I turn to the specifics of the points that have been touched on. The noble Baroness, Lady Finn, asked why eligibility regulations under paragraph 6(1) of Section 2 are useful. The ability for a Minister to lay eligibility regulations in respect of a board’s membership is a common feature in setting up public bodies. They can be used, for example, to safeguard independence, ensure expertise at its inception, or improve public trust by excluding certain individuals or demanding certain attributes. Examples might include barriers against those who are currently politically active, or have conflicts of interest or criminal convictions.

With regard to powers being exercised on a Minister’s behalf and safeguarding, there are numerous safeguards built into the Bill, such as independent oversight of all the provisions by external bodies. There are also obligations to obtain the permission of the courts for debt recovery and rights of appeal to the First-tier Tribunal. Furthermore, authorised officers will be civil servants, obliged to follow the Civil Service Code, which requires that they act solely according to the merits of the case.

In response to my noble friend Lord Davies, I am more than happy, especially given the circumstances with our noble friend Lord Sikka, to write to him with all the points of the speech I would have responded with, and I am happy to share that with all Members of the Committee—that pertains to group 9.

I take the opportunity to reassure the noble Baroness, Lady Bennett. Will any roles be outsourced? No—we are clear that they have to be authorised officers as defined in Clause 66: they have to be civil servants.

I hope that, with those reassurances, noble Lords will not press their amendments and we can move forward to the next group.

[Baroness Finn (Con)]

My Lords, as I emphasised at the outset, across this group our amendments have been probing in nature, and I am grateful for some of the clarity that the Minister has given. We are seeking clarity, not confrontation. We are trying to establish whether the Government see the authority as a truly independent body with the authority to challenge where needed, or simply as a well-staffed extension of the Cabinet Office. In seeking those answers, we are also pressing for a model of governance that ensures effectiveness, credibility and accountability from day 1.

At the heart of our amendments is a simple but critical question: how do we make sure that the watchdog has teeth and is not quietly tethered by ministerial influence? Amendments 68E and 68F speak to the need for independence at the top through a chair who is genuinely independent, free to challenge, credible in doing so and accountable to the Minister. We know from other public oversight bodies that institutional trust starts at the top so, if the Government truly believe in empowering the PSFA to be a fearless voice in the fight against fraud, they should have no hesitation in embracing the modest strengthening of the governance framework.

Likewise, Amendments 69A and 69B ask fair and important questions about how the PSFA’s executive leadership will be chosen. We are not seeking to strip the chair of responsibility; we are asking whether there is a clearer, more robust process that would enhance the authority’s legitimacy and avoid the risk of it becoming either too insular or too directed from above. Ensuring that executive appointments are overseen by a group of independent non-executives, rather than a single individual, is possibly an act of good governance. I am grateful to the Minister for clarifying that the independent non-executive appointments will follow the guide for public appointments.

Amendment 71A, meanwhile, takes on a different but equally significant concern: the breadth of ministerial regulation-making powers over eligibility for authority membership. In a body designed to scrutinise government spending and investigate fraud, the power of a Minister to decide who is eligible to serve—and more worryingly, who is not—is a red flag. The Government may never intend to use this power in order to silence critical voices or to manipulate the composition of the authority, but the mere fact that such a power exists could undermine confidence in the PSFA’s independence. This amendment seeks simply to close that door before it becomes a problem; it should not really be necessary if the full OCPA guidance is being followed.

The final amendments in the group, Amendments 74A to 74D, reinforce the need for clarity, transparency and constitutional responsibility. Whether it is ensuring the timely publication of reports, safeguarding who may speak for the authority with the official seal or distinguishing between operational delivery and retained ministerial accountability, these changes are about shoring up the credibility of the entire framework. Together, these amendments ask the Government to take seriously the institution that they are creating.

I know that the noble Lord, Lord Sikka, did not move his amendments; I am grateful for the comments from the noble Lord, Lord Davies of Brixton. I want to take the liberty, if I may, of saying that a lot of what the noble Lord said chimes with the need for public accountability and transparency, as well as with a number of the points that we have been making. Although we recognise the vital importance of oversight, we have concerns that some of the amendments might create an unnecessary, burdensome framework that might impede the PSFA’s operational effectiveness; for example, the requirement for all meetings to be open to the public could present a significant operational concern. However, we understand the purpose and principle behind what the noble Lord, Lord Sikka, is trying to do.

Turning back to this group, these amendments ask the Government to take seriously the institution that they are creating. If the Public Sector Fraud Authority is to succeed—we all want it to—it must be allowed to operate with genuine independence, proper oversight and clear lines of public accountability. That is not bureaucracy or delay; it is simply how we build a body that the public can trust and on which Parliament can rely. We offer these proposals not to frustrate the Government’s ambition but to strengthen it by ensuring that this new authority is not only operationally capable but constitutionally sound. I urge the Minister to reflect on the questions asked and to work with us to ensure that the governance of the PSFA lives up to the seriousness of its mission. I beg leave to withdraw.

Amendment 68E withdrawn.

Public Authorities (Fraud, Error and Recovery) Bill

Baroness Finn Excerpts

Committee stage
Monday 16th June 2025 Grand Committee

[Lord Sikka (Lab)]

My Lords, I support all the amendments in this group, but I want to make a brief comment on Amendment 89. It is inappropriate for the Government to have powers to extend to and include other benefits, because each benefit may well have a different dynamic as to whether there is a possibility of fraud. If you look at the DWP statistics, you will see that some of the other benefits have a very low incidence of fraud; it is universal credit that is out of line, compared to the rest. I do not think that the Government should be allowed powers to add to those three benefits. That would be highly draconian. If the present Government, or a future one, feel that there is a need, they should bring primary legislation. At that time, we can also take the opportunity to smooth the rough edges of this Bill, which might have become visible by then.

[Baroness Finn (Con)]

My Lords, I rise to speak to this group of amendments, beginning with the Clause 74 stand part notice in the name of the noble Baroness, Lady Kramer, which was moved by the noble Lord, Lord Palmer. In our view, Clause 74 is not only necessary but foundational. It establishes the power to issue eligibility verification notices, which enable authorised officers to request information relevant to verifying a person’s entitlement to public funds or services. This is not an ancillary function; it is a mechanism that enables the Bill to work.

We broadly support Amendment 79B, which proposes the addition of a reasonableness test to the Secretary of State’s power to issue eligibility verification notices under Schedule 3. Throughout this Committee stage, we on these Benches have consistently returned to a set of core principles that should underpin the powers granted by this Bill: proportionality, accountability and clarity in the exercise of discretion. This amendment is very much in keeping with those principles. It would not constrain the function of the powers in question; instead, it would help to ensure that they are used lawfully, wisely and in a way that retains the confidence of both the public and those institutions asked to assist in their implementation.

Specifically, this amendment would require that the Secretary of State be “reasonably satisfied” that issuing an eligibility verification notice is both necessary and proportionate to the objective of identifying incorrect benefit payments. That is, by definition, not an unreasonable bar. It is not designed to frustrate the aims of the Bill or delay the work of the Government. On the contrary, it would simply formalise the expectation that the powers conferred under Schedule 3 should be exercised with care and justification.

This point is particularly relevant when we consider the position of banks and other financial institutions, which may be required under this provision to provide customer information. For those institutions, it is critical that the system is seen to be operating within a clear and lawful framework. They are being asked to co-operate in a sensitive and complex process. Ensuring that the Secretary of State is “reasonably satisfied”, and that this standard is explicitly in the Bill, would help to provide clarity, legitimacy and protection for all parties involved. As the noble Lord, Lord Vaux, and the noble Baroness, Lady Bennett, made clear on the previous group of amendments, legislation needs to be made for the future and, as such, reasonableness safeguards must be on the face of the Bill.

Moreover, this amendment would reinforce public confidence in the system. When members of the public know that strong powers, such as those that allow government access to eligibility-related data, are being exercised only after a specific, documented and reasonable assessment of necessity and proportionality, they are far more likely to view those powers as legitimate. Trust, as we know, is a critical currency in any enforcement regime.

This amendment would not obstruct the use of eligibility verification notices. It would simply require that they be issued on the basis of reasonable grounds, with a clear and proportionate purpose. It would bring consistency to the Bill, reassurance to the institutions involved and greater credibility to the broader anti-fraud effort that we all wish to support.

We oppose Amendment 80, which would substantially limit the exercise of eligibility verification notices under Schedule 3 to the Bill by requiring that they may be issued only where the welfare recipient is already suspected of committing a DWP offence. I suggest that this amendment risks undermining the core function of eligibility verification and, in so doing, would weaken the entire framework that the Government are proposing to put in place to detect and prevent fraud. Let us be clear about the purpose of the eligibility verification power: it is not primarily an enforcement power but rather a tool of assurance and risk management, designed to help to identify cases where payments are being made incorrectly.

The core problem with this amendment is that it conflates suspicion with verification. It assumes that an authorised officer must already suspect a DWP offence before reviewing financial data. In practice, however, it is often the financial data itself—the information provided in an account—that gives rise to that suspicion in the first place.

I turn to Amendment 89. We support the principle behind this amendment, which seeks to ensure that the powers contained in this Bill—substantial powers, we must all acknowledge—are exercised only in relation to the specific benefits explicitly listed in the Bill. This is not a wrecking amendment, nor one that seeks to undermine the Government’s legitimate goal of strengthening our response to fraud and error. Rather, it is about ensuring that when we legislate new powers, they are accompanied by a clear, democratic mandate and appropriate parliamentary scrutiny. The provision that this amendment seeks to remove would grant Ministers the ability, by regulation, to extend the application of these powers to further benefits beyond those originally listed. I submit that such an extension should not be done by regulation alone but rather with the explicit consent of Parliament through primary legislation or a tightly scrutinised process.

The powers outlined in Schedule 3, including access to personal financial information, the issuance of eligibility verification notices and the ability to act on suspicion of fraud, are not minor administrative tools. They represent a significant expansion of state capacity to inquire into private affairs in the name of public interest. That may well be justified in many cases, but it is only right that Parliament retains control over when and how these powers are extended to new areas of social security.

Supporting this amendment means drawing a line in the sand that the list of benefits to which these powers apply is not open-ended and that any extension should come back before Parliament for proper consideration. If, in future, a compelling case is made to include additional benefits, let that case be made here, in public, with scrutiny and accountability. That is how we ensure confidence in the law, in enforcement and in our broader welfare system.

This is not about resisting action on fraud but about ensuring that the tools we use to combat fraud are clearly grounded in public consent, which gives the system legitimacy. It is about protecting the balance of power between executive action and legislative oversight.

We have made the argument throughout Committee that clarity, transparency and accountability must be woven into the fabric of the Bill. This amendment speaks directly to those principles. It ensures that the powers in this legislation are not allowed to expand by stealth but only by clear, deliberate parliamentary decision.

I hope that the Minister will see this not as a restriction but as an opportunity: to reinforce the legitimacy of the powers the Government seek and to show that we are committed not only to effective fraud prevention but to the principled governance of that process. For that reason, we support this amendment.

Finally, in addressing the stand-part notice of the noble Baroness, Lady Kramer, on Schedule 3, we understand that this is an area of concern for many noble Lords across the Committee, but we do not feel that removing the schedule from the Bill is necessarily the most constructive way to go about this in Committee.

I appreciate that this is probing, and we therefore hope that the Government will use this opportunity, in responding to the stand-part notice of the noble Baroness, Lady Kramer, to address the concerns that we and many other noble Lords have raised in Committee, even if we do not support the noble Baroness’s stand-part notice.

[Baroness Sherlock (Lab)]

My Lords, I am grateful to noble Lords who spoke on this. I promise not to speak for long on this but, since it is the first time we have discussed the eligibility verification measure, I will, for the record, try to explain how it works, and, I hope, help the noble Baroness, Lady Fox—I apologise for my failure to explain it to her hitherto. I will have a go at doing that, and I will talk to the amendments as we go.

Clause 74 introduces new Section 121DB and Schedule 3B to the 1992 Act. They contain the provisions for the eligibility verification measure, which enables the Secretary of State to issue a bank or other financial institution with an eligibility verification notice, or EVN, which will help the DWP identify incorrect payments in the social security system. Ensuring that the right person is paid the right amount at the right time will help prevent both fraud and genuine errors, meaning that people do not accidentally build up debts, with all the concern that that causes.

As I set out at Second Reading, this is a data-requiring measure. It will enable the DWP to ask for data from banks to help identify incorrect payments and verify eligibility for specific benefits. It is about requiring banks to look within their own data and provide limited, relevant information on the accounts they have identified that match the eligibility indicators provided by the DWP. Just to clarify, we will ask the banks to look at accounts into which we make benefit payments, and we will give them the criteria, which clearly can only be things related to eligibility for the benefits under question.

That limited information will help the DWP to identify where claimants do not meet eligibility criteria for the benefits they are receiving. Getting access to information is key to addressing the whole fraud and error challenge. But if your Lordships think about other areas, we have seen how the DWP getting access to data such as earnings information from HMRC has massively reduced income-related overpayments. In fact, if you look at people on PAYE and universal credit, earnings-related fraud and error have pretty much been wiped out by getting access to earnings data directly from HMRC.

I will speak to Schedule 3 in a few moments. Let me look first at Amendment 79B from the noble Lord, Lord Vaux, which seeks to ensure that an EVN may be issued only when the Secretary of State is satisfied that it is necessary and proportionate to do so to achieve the aim of identifying incorrect benefit payments. This is the nub of it. Clearly, I agree that the power must be proportionate and necessary before we use it. We are bringing forward the legislation because we believe it is necessary, and we have already taken enormous steps to ensure that it will be used proportionately.

The reason it is necessary is that taxpayers deserve to know that every pound of their money is being spent wisely, and that benefits are being paid to those who need them and are legally entitled to them. This measure will improve the DWP’s access to important data to help verify entitlements, to ensure payments are correct, and to stop overpayments building up and debt accruing.

The National Audit Office made a telling point in the Commons at the evidence stage, basically saying, “If you want to enforce the eligibility criteria that Parliament has set, such as capital limits, you have to provide the DWP with a tool that goes a bit further than just asking people”. We do not know of other ways to get the necessary information to be able to pursue the kind of overpayments and fraud that are out there. However, I just remind the Committee that the measure has been designed with hugely strict safeguards, most of which are in the Bill, and they are supported with further detail in the code of practice, of which noble Lords have seen a draft, to ensure that the power is being used fairly and proportionately. The legislation sets out the benefits in scope, of which more later, and the type of information that can and cannot be shared under the power, and includes provisions to bar financial institutions from sharing transaction information or special category data.

Public Authorities (Fraud, Error and Recovery) Bill

Baroness Finn Excerpts

Committee stage
Wednesday 18th June 2025 Grand Committee

Moved by

[Baroness Finn]

99A: Clause 88, page 54, leave out lines 5 to 7
Member’s explanatory statement
This amendment would ensure that the Secretary of State did not have the power to direct the independent person to review only certain timeframes.

[Baroness Finn (Con)]

My Lords, Amendments 99A to 99C have been tabled, as ever, in the spirit of constructive scrutiny and with the aim of strengthening one of the more significant accountability provisions in the Bill: the independent review process set out in Clause 88.

These amendments are modest, reasonable and necessary. They are not designed to undermine the intention of Clause 88 but quite the opposite: to give that clause the clarity, independence and rigour that an effective review mechanism surely must demand. Fundamentally, they seek to correct the text in the Bill as drafted, as this would not provide for a proper independent review process of the exercise of powers under this part of the Bill. As we have been clear throughout these days in Committee, having a proper, full and independent review mechanism is an essential requirement to balance the powers granted.

Let me begin with Amendment 99A. As currently drafted, new Section 109J, to be inserted by Clause 88, allows the Secretary of State to direct the independent person to review only certain timeframes, saying in subsection (1):

“The Secretary of State may give the independent person appointed … directions as to the period to be covered by each review under section 109I”.


This, in our view, strikes at the heart of the independence that the clause is meant to enshrine.

If the Secretary of State can determine the scope of the review in such a narrow and discretionary fashion, deciding what is in and what is out, we risk reducing the entire review process to something partial and predetermined. An independent reviewer must have the freedom to examine the full timeline of events, decisions and outcomes as they see fit, not just the periods that a Minister deems relevant. This amendment would remove the power for the Secretary of State to constrain that scope. It would ensure that the independent person can review what needs reviewing, not merely what it is convenient to review.

Further to this, Amendment 99B addresses another area in which we believe the clause falls short of its intended purpose. As present, new Section 109J(3) states:

“The Secretary of State may disclose information to the independent person”.


We do not think this is adequate. For a review to be meaningful, the reviewer must be empowered to access all relevant material. It cannot be left to the Minister to determine what relevant information may or may not be disclosed to the independent person for review. By replacing “may” with “must”, this amendment would impose a basic but essential duty for the Government to co-operate with their own independent review mechanism. This should not be controversial. If the review is to be credible both in substance and perception, the provision of relevant documents, data and records must be a legal obligation, not a voluntary gesture. Our amendment would ensure that the independent reviewer could operate with true independence and without the bias that the discretionary drafting currently in the Bill implies.

We must appreciate that if the Secretary of State can direct the scope and scale of these independent reviews, they cannot truly be called independent. As noble Lords across the Committee will know, the outcome of such a process is only as good as the information that is put into it. I am sure that this Minister would not allow biased information or timeframes or seek to direct the independent reviewer. But, as noble Lords have previously made clear in Committee, we must legislate for the future and future Ministers. This cannot be done on the basis of guarantees alone. I trust the Minister implicitly, but I do not know—indeed, none of us in this Committee knows—that we could always say the same about her successors. It is important that we ensure that this independent review process is independent from day one and there is no risk of it becoming a rubber-stamping body used to sign off favourable reviews on the back of limited information and narrow timeframes.

Finally, Amendment 99C would compel the appointment of independent persons to carry out reviews in England, Wales and Scotland. The Bill in its current form allows the Secretary of State to do so but does not require it. We think that is a mistake. Public sector fraud is not a phenomenon confined to one part of the United Kingdom. If we are serious about building a coherent and credible national response, it follows that there must be consistent independent scrutiny across all three nations. Leaving this to ministerial discretion opens the door to uneven practice and potential political selectivity. By making the appointment of independent reviewers mandatory across the nations, we would create a consistent framework for accountability —one that reflects the devolved landscape while still holding the centre to account.

Taken together, these three amendments seek to reinforce what I believe the Government want to achieve: an independent, well-informed and effective review mechanism. They would ensure that reviews are not unduly limited, that reviewers are not kept in the dark and that all parts of the UK are covered by the same standards of transparency. In short, these amendments would close the gaps that could otherwise turn an accountability provision into an optional exercise. I hope the Minister will reflect carefully on their intent and consider how they might help deliver a stronger, fairer and more credible oversight process. I beg to move.

[Lord Vaux of Harrowden (CB)]

My Lords, I rise briefly to add my support to the first two amendments in this group. While I agree with removing the discretion of the Secretary of State, Amendment 99A does not say what the period of the review should be. I suggest that it should be the same as the period of the review for the eligibility verification notices, which is annual, and that that is what should be in the Bill. It would be useful to hear from the Minister what the Government are proposing in that respect.

--- Later in debate ---

[Baroness Sherlock (Lab)]

My Lords, I am grateful for the contributions to this short debate. I hope that I can answer the questions that have been raised.

The first and most important piece of information is to remind the Committee that in the Commons my honourable friend the Minister for Transformation made it clear that His Majesty’s Inspectorate of Constabulary and Fire and Rescue Services will be commissioned to inspect the DWP’s criminal investigation powers for England and Wales and HMICS for Scotland. I hope that that is helpful. I can reassure the noble Baroness, Lady Finn, that the reason why we chose HMIC is that for more than 160 years it has been carrying out independent scrutiny of law enforcement in England and Wales, including the police. There is no danger whatever that it will be any kind of box-ticking exercise, if HMIC is doing it. I am sure that she can be reassured on that front.

I hope that that shows the level of commitment that we have to the level of scrutiny. If we want to do it properly, HMIC is the body to scrutinise powers of this seriousness. But we have worked closely with HMICFRS and HMICS. We intend to operate in the same way as other law enforcement agencies that are subject to inspections by those bodies. What will happen is that, prior to each inspection, the DWP and the inspectorate body will mutually agree the period that the inspection will cover. That is to make sure that the inspection can cover all necessary activity that has been undertaken, which is a common way of operating. We have no reason to believe that it will not operate well in this case.

We understand that sharing information is essential and will obviously not seek to misrepresent or hold back any relevant information. The legislation as drafted allows us to share all relevant information. But it is essential that the Secretary of State retains discretion—for example, being able to choose not to provide information that may be particularly sensitive and where sharing it could have a detrimental impact, such as on the outcome of an active case. The DWP will fully support and co-operate with the inspection bodies and its reports will make clear if we did not do that. But we want to do so, to make sure that we can deliver on these powers to the right standard.

I am grateful to the noble Lord, Lord Vaux, for answering one question for me. There will indeed be inspectorates. HMICFRS will cover England and Wales and HMIC will cover Scotland to enable us to have a different reviewer in the two places. I hope that, given those reassurances, the noble Baroness, Lady Finn, will not press her amendments.

[Baroness Finn (Con)]

My Lords, I thank the Minister for her reply. As we draw this debate to a close, I return to the fact that these amendments are rooted in the core values of fairness, transparency, independence and accountability. I thank the noble Lords, Lord Vaux and Lord Palmer, for their support, although I know that the noble Lord, Lord Vaux, has not supported Amendment 99C.

The independent review mechanism outlined in Clause 88 should be one of the central safeguards of the Bill. It should ensure that the powers conferred are used proportionately, effectively and in the public interest. As it currently stands, that mechanism risks being weakened by loopholes and discretionary clauses that leave too much power in ministerial hands. I note the response about HMIC, but it still goes to the core that we want this Bill as a standalone and that those loopholes are necessarily closed.

Amendment 99A speaks to a fundamental concern: the right of the Government to define the terms of their own scrutiny. That is not a mark of confident democracy. A review that can only examine certain timeframes selected by the very people being reviewed is not a genuine safeguard; it is a managed narrative. True independence means giving the reviewer the authority to follow the evidence wherever it leads, not wherever the Secretary of State allows.

Amendment 99B is in many ways even more foundational. What is the value of appointing an independent person if that individual can be denied access to the very information that they need to do their job? We cannot have effective oversight if it depends on the good will of the department being examined. I take note of what the noble Lord, Lord Palmer, said. There is a huge difference, as I know well from my own time in government, between the words “may” and “must”. “Must” is a minimal expectation if we are to uphold the principles of openness and integrity. Anything less risks turning independence into theatre and accountability into a form without substance.

Amendment 99C is about consistency. I appreciate that the noble Lord, Lord Vaux, considers it unnecessary. However, if fraud knows no borders between England, Wales and Scotland, neither should scrutiny. We cannot rely only on the Secretary of State’s discretion to decide whether an independent review happens in one nation but not another, because that creates potential confusion and disparity and the appearance, if not the reality, of selective transparency. This is a probing amendment and I appreciate what has been said, which I will pick up on later. What we are aiming for is a duty to appoint independent reviewers across the devolved nations so that trust is not patchy but uniform across the United Kingdom.

When taken together, these amendments must represent a clear and coherent vision that government power must be matched by government accountability. That review must be more than just process. It must be meaningful, showing that we do not fear scrutiny but welcome it, because it is through scrutiny that public trust is earned and retained. The Government have rightly set out to tackle fraud and protect public money, but if the public are to believe that this effort is both rigorous and fair, the checks that we place on those powers must be equally robust. These amendments deliver that balance, not to obstruct but to uphold the values that any confident, responsible Government should share. I urge the Minister to consider the purpose and principle that these amendments seek to preserve. Let us not pass up the opportunity to make this legislation stronger, fairer and more trustworthy. I beg leave to withdraw the amendment.

Amendment 99A withdrawn.