Baroness Finn
Main Page: Baroness Finn (Conservative - Life peer)Public Authorities (Fraud, Error and Recovery) Bill
Baroness Finn ExcerptsMonday 9th June 2025
(3 days, 16 hours ago)
Grand CommitteeRead Full debate Public Authorities (Fraud, Error and Recovery) Bill 2024-26 View all Public Authorities (Fraud, Error and Recovery) Bill 2024-26 Debates Read Hansard Text Amendment Paper: HL Bill 96-II(Rev) Revised Second marshalled list for Grand Committee - (6 Jun 2025)
Baroness Finn
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.
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.
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.
Baroness Finn
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.
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.
Baroness Finn
“(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.
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.
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.
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.
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.
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.
Baroness Finn
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.
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.