Public Authorities (Fraud, Error and Recovery) Bill

Baroness Fox of Buckley Excerpts

Committee stage
Wednesday 18th June 2025 Grand Committee

I conclude by saying that I have taken some time to spell out many details that I am sure the Committee will be reasonably familiar with, but, at the same time, perhaps it is a test for the Minister to give us some full explanations as to the safeguards that they are putting in place. I beg to move.

[Baroness Fox of Buckley (Non-Afl)]

My Lords, I warmly welcome these amendments in the name of the noble Viscount, Lord Younger. I appreciated the detail that he went into because it is important that we remember that these direct deduction orders are real instruments of power. I am interested in how they will be used differentially, because I do not want them to be a blunt instrument. Therefore, it is worth remembering and considering those who might be on the receiving end of them.

In an earlier group discussing search and seizure, I had been considering speaking but was in some ways put off, because I thought that the search and seizure measures were only meant for organised criminal gangs. As was pointed out, if that was in the Bill maybe it would be more reassuring. It is difficult to know how many people will be affected by the same powers. We want to differentiate, surely, between the vulnerable and an organised criminal gang. There are those who are technically fraudulent, but it is because they have made a mistake, and so on.

I particularly thought of that because I listened to a vivid documentary recently about bailiffs and people who had got themselves into all sorts of distress and debt, with bailiffs kicking down their doors. I had that caricature in my head, and I do not want that to happen to those people. I am not suggesting the search and seizure measures will lead in that direction, but we should always think: who is on the receiving end of these powers? How did they get into that situation? How does the Bill make a distinction so that we do not, on the one hand, have a one-size-fits-all approach? On the other hand—this is a slight anxiety I have— I do not want us to simply get into a situation where we are saying that, because people are on welfare, they are vulnerable. That is equally a caricature, and I do not think it is helpful for us to see people always in a victim role.

I would be interested—that is why I welcome this group—in making the distinctions and learning how the Minister envisages us making the distinctions between the multitude of people on welfare when these powers, which are quite severe in many instances, are going to be applied. How will that happen? Who makes the decision? I think that is why these amendments are very useful.

[Lord Palmer of Childs Hill (LD)]

My Lords, I am pleased in this instance to express my strong support for Amendments 99D and Amendment 109ZA, tabled by the noble Viscount, Lord Younger, and the noble Baroness, Lady Finn. I have not been quite so firm in my support for others, but Amendment 99D would ensure that, before any deduction is applied to recover debt overpayment, due regard is given to the wider circumstances and vulnerabilities of the liable person. There would be a requirement for this assessment to be documented and available to the claimant on request.

This is a vital safeguard that would place fairness and compassion at the heart of the debt recovery process, ensuring that individuals are not pushed into hardship without a proper understanding of their personal situation. It aligns with my and my party’s commitment to a welfare system that is both effective and humane, recognising that people’s circumstances can be complex—gosh, they certainly can be—and that a one-size-fits-all approach to debt recovery is neither just nor practical.

Amendment 109ZA—we have a wonderful numbering system—would further strengthen these protections by requiring the Minister to consider the additional costs of living with a disability before making a direct deduction order. This would be an essential step in ensuring that disabled people, who often face higher living expenses, are not disproportionately affected by debt recovery measures. Both amendments reflect the principles of proportionality and sensitivity that should underpin all government action in this area. They represent a significant improvement to the Bill’s framework for tackling fraud and error while safeguarding the dignity and well-being of the most vulnerable.

Unlike the noble Baroness, Lady Fox, who said she was a bit hesitant on this, I urge the Committee and the Minister to support these amendments, which would ensure that the pursuit of public funds is always balanced with compassion and respect for individual circumstances. At this stage of the Bill, as mentioned by the noble Viscount, these measures need to be introduced so that we can perhaps on Report include them in the Bill.

--- Later in debate ---

Moved by

[Baroness Fox of Buckley]

102: Schedule 5, page 104, line 19, leave out “make” and insert “apply to the appropriate court for”
Member’s explanatory statement
This amendment removes the power of the Secretary of State to make direct deduction orders and instead provides for direct deduction orders to be made only by a court following an application by the Secretary of State to the court.

[Baroness Fox of Buckley (Non-Afl)]

My Lords, in moving Amendment 102, I shall speak also to Amendment 122. I thank the noble Lord, Lord Palmer of Childs Hill, for putting his name to these amendments.

These amendments are similar to those that I tabled in an earlier group in relation to Part 1. In this instance, they focus on removing the power of the Secretary of State to make direct deduction orders and instead suggests that DDOs be made only by the relevant court following an application from the Secretary of State.

Throughout Committee, the noble Lord, Lord Vaux, has helpfully stressed that, when we are having this discussion, particularly in this environment, it is very difficult to imagine a Minister other than the noble Baroness, Lady Sherlock, who I do not think of as a malign person. In this instance, this is not helpful, because as a Committee we must always take a decision based on what we think could happen in future—what powers are being created—and therefore we bring to bear as much as we can the safeguards as a Committee.

I think that we can all agree, and we keep saying this, that it is important to note that the powers are in pursuit of a legitimate aim: here, to reclaim overpayment of money paid to welfare claimants. Following the previous group, we should not say that a welfare claimant, if they have defrauded the state, should be treated with kid gloves—I am not suggesting that. But whenever new state powers over the individual are created, a legitimate aim is not enough to mean that we should not have a more granular probing of the powers that have been created, which is why we as a Committee need to insist that powers are tightly drawn to guard against arbitrariness and limited to what is necessary and proportionate. When the Government award themselves powers, as they do in this part of the Bill, to intrude on the privacy of anyone’s bank account, check on its contents and remove money, there needs to be a strong legal justification. As yet, I am not convinced that we should not make it the job of the courts to best determine and assess when this is appropriate.

In an earlier group, on search and seizure powers, the Minister reassured the Committee that we do not need to worry because this would happen only with court approval. I am suggesting that we might need court approval here. The DWP characterises DDOs as a power of last resort, which can be exercised only when the Secretary of State has given the debtor a reasonable opportunity to settle the debt and notified them of the possible use of the powers. I felt that the Minister’s helpful explanation earlier really brought this to life.

On the other hand, there is no definition in the Bill of what, for example, a reasonable opportunity threshold might be. Ironically, one of the safeguards presented by the DWP is a check on affordability, in terms of fairness. This takes the form of account information notices. I know that we will have a number of amendments on that issue, but I want to dwell on this now, because these safeguards are one of the most egregious aspects of the Bill. To consider whether the debtor can afford to have funds deducted before the Secretary of State makes a DDO, page 105 of the Bill tells us that

“the Secretary of State must obtain and consider bank statements for the account covering a period of at least three months”.

One requirement of the account information notices is that the bank must not notify the account holder—or anyone associated with them, for that matter. Surely this, as I have mentioned in previous contexts, puts the bank in an invidious position of being compelled to breach any professional confidentiality that it owes its customer, even if its customer is a debtor, based on the word of the Government telling it that the account holder owes the DWP money. Compelling banks to hand over bank statements secretly, however benign the motives in relation to affordability checks—all without any external oversight, such as judicial authority —needs to be probed in terms of its efficacy and ethics, which is what these amendments try to do.

Before issuing a DDO, the Secretary of State must give the debtor and any joint account holder notice of the proposed order and invite them to make representations, as the Minister explained earlier. On the basis of these representations, the Secretary of State will decide whether and on what terms to make the DDO, and may do so only if satisfied from bank statements and representations that the order is fair and that the liable person, the account holder and their dependants will not

“suffer hardship in meeting essential living expenses”.

That sounds so reasonable but, in reality, it hands extraordinary discretion to the Secretary of State, as there is no threshold to determine what constitutes hardship or essential living expenses. I am sure that, if we went around the Room, we would have various versions of what we need to live on and would argue over it. Who decides what is fair in this instance? I suggest that at least having an external court look at this would be more appropriate.

Perhaps we would put such qualms aside, if these powers applied only to overpayments caused by deliberately fraudulent behaviour. I can see why going hard on fraudsters might be popular, but these powers to seize funds directly from bank accounts without judicial scrutiny will also apply to individuals who have been overpaid as a result of making a mistake when filling out one of those notoriously complex claim forms, who have failed to update a change in their circumstances, or who may just be struggling to navigate the system in general. Such errors—that is what they are—account for almost a quarter of overpayments. They include errors caused by the DWP’s own actions, as the carer’s allowance scandal revealed, but it is the likes of unwitting carers who will be on the receiving end of these powers, yet the negligent DWP staff who made the mistakes are nowhere caught by the powers that we are discussing.

I say this not to have a go at the staff, in that instance, but to note, as we have talked about previously, that we do not need a one-size-fits-all situation. That was the point that the noble Lord, Lord Palmer, made and it is very important. All sorts of people will be caught up—people making mistakes, vulnerable people and some fraudsters—but they will all be treated the same.

--- Later in debate ---

[Baroness Sherlock (Lab)]

I apologise; I forgot to answer that. No, it does not. These measures apply to any kind of overpayment but, as I described, they are only matters of last resort. We have to have gone through all the other possibilities and people must simply have failed to engage. So this really will happen only if somebody is absolutely not engaged with us at all. As is the case with deductions from benefits or deductions from earnings, they are available as a tool for overpayments, whether or not they will be used.

[Baroness Fox of Buckley (Non-Afl)]

I thank the noble Lords who spoke on these amendments for appreciating—even if they did not support—the spirit of what they are trying to do. Despite that, I do actually want to do this rather than just wanting the spirit. But I know that the noble Viscount, Lord Younger, feels that it will not work practically. But we have had a slightly contradictory answer there, because they are either absolutely the last resort and will hardly ever be used—in which case they will not clog up the court system, to be fair—or they will be used a lot more, which means that there is all the more reason for them to go through the courts, if they will be used liberally from the point of view of a safeguard. So I did get confused about that.

Some thoughtful points were made. The noble Lord, Lord Vaux, usefully probed the Minister—in a way that I was not able to—on exactly when and in what circumstances. These questions about the distinction between error and where the overpayment came from matter in relation to the powers that have been created.

[Baroness Sherlock (Lab)]

Will the noble Baroness give way?

[Baroness Fox of Buckley (Non-Afl)]

Yes, of course.

[Baroness Sherlock (Lab)]

I am sorry to interrupt—I never get to say that anymore. I thought it might be helpful for the Committee if I clarified. The noble Lord, Lord Vaux, referred to Clause 89; that actually refers to administrative penalties and recovery for non-benefit payments, not for benefit payments. I should have made that clear. I am sorry to interrupt the noble Baroness, Lady Fox, in full flow—please carry on.

[Baroness Fox of Buckley (Non-Afl)]

It is very helpful for these things to be clarified. As noble Lords can see every time we are in Committee, I have so many pieces of paper, so I appreciate that and am not saying that I am on top of all the detail.

However, I think it is important, in the spirit of the way that the noble Lord, Lord Palmer, was motivated to support these amendments, that this is not just about the detail; there is an important principle here. I really liked the viral film mentioned by the noble Baroness, Lady Bennett of Manor Castle, because people do care about this Bill and what its impact will be, and we have to be able to answer all the questions as the legislators who are debating it. People know that we are involved in this, and I sometimes feel that it is unclear exactly what will be acquired by all these powers.

The problem with saying that these powers will hardly ever be used is that these powers are going in the statute book, so they can be used. I am not going to talk about bank statements again, but the reason I raised them on this group is because, before a DDO can be introduced, you have to check bank statements through the mechanism of the affordability checks that we will go on to discuss, and that is a breach of privacy. If we are giving the DWP the power to do this, we need to have a check. The way we have done that historically is to rely on the courts to take money. As this is related, I am trying to see whether this could be a useful check to make sure that these powers are not exploited.

We have plenty of time to go, so I think some of us may come back with a version of this amendment—potentially better worded—when we get to Report. It is not just to fly the flag for civil liberties but, as I think the noble Lord, Lord Palmer, said, a need to have trust in the system. If the Bill is to be taken seriously by people who do not just think that it is draconian and who do not do the caricatures that the Minister wants, it must be watertight in its safeguards and protections, as well as in the powers that it creates. Those two things have to live together; otherwise, it will be discredited before it even hits the statute book.

[Viscount Younger of Leckie (Con)]

I just want to pick up on something quite interesting that the noble Baroness said, which leads me to ask a question of the Minister. I am not expecting an answer now. It is to do with the capacity or number of cases. I have no idea how many DDO cases could end up going to the courts, but it may be more than the noble Baroness, Lady Fox, thinks. I am just reminded of my experience of the Child Maintenance Service: it looks at those people who we know can pay and who are not paying, and they go all the way to the courts. There are many thousands. I rest my case by saying that there is a danger that the courts could be clogged up, but it would help the Committee to have some idea, perhaps in writing, of the number of cases that would or could go to court as a consequence of these amendments.

[Baroness Sherlock (Lab)]

I will write to the noble Viscount. As he knows from his experience with the Child Maintenance Service, as each form of enforcement comes into view, more and more people simply pay without it being necessary, so a sort of funnel comes down. If we have any information about scale, I would be happy to write.

[Baroness Fox of Buckley (Non-Afl)]

I beg leave to withdraw my amendment.

Amendment 102 withdrawn.

--- Later in debate ---

[Baroness Bennett of Manor Castle (GP)]

My Lords, it is a pleasure to follow the noble Lord, Lord Palmer of Childs Hill, who has clearly and eloquently outlined the reasons for this amendment, which the noble Baroness, Lady Kramer, tabled, and to which I attached my name. The noble Lord talked about the risk of loss of trust in public authorities. We should also look at the other side of this: the loss of trust in banks. People may have heard the acronym GDPR. People might not know all the ins and outs but they think that anything to do with bank accounts is private stuff. They want to trust that if their information is with the bank, it is not going to be handed out to anyone else. We have a situation whereby, although the situation has improved in recent years, still 2.1% of Britons are unbanked. That figure is significantly higher for the under-25s. It is also higher in some regions and nations; for example, Scotland.

We have to think not just about the impact on attitudes towards the DWP. I thank the Minister for acknowledging in her response to my previous contribution that the department has a long way to go. However, bank statements contain all sorts of information beyond what is relevant to anything the DWP knows about. For example, people may find themselves in a difficult situation after a relationship has broken down, and their bank statement may reveal all kinds of things about their personal life that they really do not want anyone else to see. There may be purchases they consider embarrassing. They do not want anyone else to see them. Getting the whole copy of the bank statement is not going to provide just information relevant to what the DWP is doing or not, or any other income and so on. There is going to be a lot of other material as well. As the Bill is currently written, it is disproportionate, as the noble Lord, Lord Palmer, said.

[Baroness Fox of Buckley (Non-Afl)]

Very briefly, I absolutely support the amendment. I raised some of my concerns when moving my amendment in the previous group. When I heard that bank statements could be requested, I thought it was not true and I kept having to check it. I thought, “This cannot be right”, because throughout the passage of the Bill we have been assured by the Minister, “Oh, no. We do not want any details. We are only going to have the name. There is no surveillance”. I then thought, “Oh my God, they can get the bank accounts of individuals, allegedly to check whether they have enough money in their bank account, saying that they are doing it only because they are being nice to them”.

I am of the generation who think that if you lose your bank account, there is serious jeopardy. In other words, I would never show my bank accounts around. I am paranoid about anyone seeing my bank accounts. I worry about that sort of thing, although it is not that I have anything to hide—just to note. As the noble Baroness, Lady Bennett, indicated, you can find out from people’s bank accounts what their politics are, their trade union affiliations and their sexual preferences —all sorts of things. On the idea that the DWP will not be looking at that but will just be checking how much money you have, it cannot do that. It is essential that we think twice about this.

These account information notices also apply to joint bank accounts. I know that we are going on to discuss joint accounts in a minute, but that means that those pots of intimate, private, sensitive and granular information held within a bank statement can be revealed about individuals who are not on benefits, who are not debtors, who are not involved at all—they simply share a joint account. I would like this removed from the Bill. It is too scary.

[Viscount Younger of Leckie (Con)]

My Lords, I thank the noble Baronesses, Lady Kramer and Lady Bennett of Manor Castle, for tabling this amendment. I recognise the spirit in which this proposal is made—a desire to ensure that the use of direct deduction powers is subject to proper scrutiny and does not override individual rights without appropriate justification.

However, I must express some serious reservations about the effect that this amendment would have. By removing the ability of the DWP to request relevant bank statement information from financial institutions before issuing a DDO, we risk undermining the very evidential foundation that should underpin the use of this power in the first place. If we are to give Ministers and their departments powers to recover money owed to the public purse—a legitimate policy objective that is supported on all sides of this Committee—we must also ensure that those powers are exercised responsibly and on the basis of proper evidence. Access to account information, under strictly controlled conditions, is part of what makes that possible. Without it, the risk is not simply inefficiency or delay. The greater danger is that deduction decisions could be made with incomplete or inaccurate information, leading to inappropriate enforcement action or simply to missed opportunities to recover legitimately owed funds. Neither outcome would serve the interests of fairness, nor would they deliver good value for public money.

We have heard throughout Committee about the importance of a system that is not only robust but proportionate and just. I entirely agree—as our amendments and interventions thus far have made clear. However, for a system to be proportionate, it must be informed, which requires access to evidence. I reiterate the concerns that we raised on these Benches at Second Reading. Schedule 3B (1)(2) (b)(i) makes it clear that an eligibility verification notice, which would serve to identify or help to identify fraud, can be applied only to the bank account

“into which a specified relevant benefit has been paid”.

As my noble friend Lady Stedman-Scott set out at Second Reading, we are concerned that this creates a substantial loophole which could be exploited by fraudsters who are, as the government amendments have suggested, able to find out whether they are being pursued by the DWP through an information request. This is a real issue. It seems a likely and obvious outcome that such a person could move money between the relevant account and another, held with different bank, to avoid scrutiny.

We submit that for this to be an enforcement regime, there cannot be any loopholes or workarounds which may permit a fraudster to hang on to the money that they have stolen from the taxpayer. As we stated at Second Reading, the Bill as set out suggests that the Government will be tied up in a legal bind, ensuring in statute that they cannot verify or ultimately pursue the recovery of funds that are not held within the account specified. However, with the right safeguards and with responsible communication of information, there is surely a way in which this regime can be constructed that is responsible and fit for purpose.

We believe that the Government must expand their capacity and ability to access further bank accounts held in the name of the relevant person to prevent them simply opening another account and moving money around, which, as the Bill is currently drafted, seems to be a clear and easy way for them to avoid both proper scrutiny and will prevent the money being recovered. Perhaps the Minister will say whether parallels can be drawn with the current system set out between HMRC and the banks for the recovery of tax resulting either from overpayments or tax fraud, which I am sure she will say works. That may be helpful.

Finally, I want to respond briefly to the concerns raised about whether these provisions amount to a snoopers’ charter—a charge that has been raised throughout the passage of the Bill. It is right that we scrutinise the scope of these powers carefully, but it is also important to be clear about what the Bill does and does not do. In our view, the Bill sets out defined and limited circumstances under which verification measures may be used. It cannot be doubted that an informed and fair decision on deduction orders can be reached only if it is grounded in accurate and up-to-date information. I believe that it is for the Government to make it absolutely clear in Committee how these safeguards on process will function in practice and how transparency and accountability will be maintained. I understand the sensitivities involved in accessing bank data. That is why these safeguards and oversight mechanisms are important.

With that, I hope that noble Lords will reflect on whether the amendment achieves that balance, and I look forward to the Minister’s response on how the very valid concerns that it speaks to can be addressed.