Public Authorities (Fraud, Error and Recovery) Bill

Baroness Kramer Excerpts

2nd reading
Thursday 15th May 2025 Lords Chamber

[Baroness Kramer (LD)]

My Lords, this is not my usual field, so I shall be listening with great interest to the various speeches, including the maiden speech of the noble Baroness, Lady Spielman. Stamping out public sector fraud, including public authority and welfare fraud, is clearly a priority. These are despicable crimes that undermine our public services and, in the end, hurt the most vulnerable. However, this Bill, at least to my eyes, has some serious flaws.

Part 1 focuses on investigation of fraud outside the tax and benefits system. As I read it, I was surprised to find that it has nothing to say on whistleblowing. I am certain that, without a powerful whistleblowing framework that keeps whistleblowers safe from retaliation and leads to investigation, most bad actors will escape investigation. If the Minister doubts me on the importance of whistleblowing, I ask her to look at the speeches by Nick Ephgrave, director of the Serious Fraud Office, who is even willing to incentivise whistleblowers because they are so vital. In April, he told the All-Party Parliamentary Group on Anti-Corruption and Responsible Tax that his number one need from parliamentarians is to get him more whistleblowers.

Whistleblowers identify where in the haystack wrongdoing is hidden and provide vital evidence. The noble Lord, Lord Livermore, is more frequently the Minister engaged in debates in which I am involved. In response to a question from me in February, he said:

“I met Tom Hayhoe, the Covid Counter-Fraud Commissioner … he told me that he is considering a whistleblowing mechanism to enable the public to draw attention to abuses they are aware of”.—[Official Report, 5/2/25; col. 690.]


I ask the Minister to go back and look at this issue, because, if she talks more broadly to investigators, she will discover this is a critical area which needs to be seized upon immediately.

On the second part of the Bill, I take on board the concerns of UK Finance that the Bill risks not achieving its objectives. The role given to banks to verify eligibility for benefits and recover money seriously needs a rethink to provide proper customer safeguards. It makes no allowance for people of low financial capability, for example, nor even for those hiding funds to escape domestic abuse. I am really concerned that it creates two classes of citizen: those with full rights in our society, protected by the FCA’s consumer duty, for example, and a lower class, defined as benefit recipients, who are investigated without cause and treated as a suspect class.

Listening to the finance industry, it is absolutely clear that bad actors, especially the gangs, will have no difficulty at all working around all the new rules and programmes. The Minister must be aware that any serious crackdown on fraud has to tackle the organised crime gangs who conspire to commit welfare fraud on an industrial scale. Last year, one gang alone was convicted of defrauding £53 million of universal credit. That was a very rare success, unfortunately. Since I cannot find it anywhere, can the Minister say today what percentage of welfare fraud is the work of these organised gangs? I suspect that the number is very large.

The main tool in this Bill is to initiate fishing expeditions and, from wide experience across the fields of investigation and fraud, they are the laziest and most ineffective way of fighting wrongdoing. If anyone doubts the capacity of the DWP to get schemes such as this one wrong, look at the carer’s allowance scandal, which particularly exercises my colleagues. My noble friend Lord Palmer of Childs Hill will elaborate, but 136,730 people are at present caught in outstanding debt for carer’s allowance overpayments which were not their fault, but for which their lives are being devastated. I fear that, in the way this Bill is crafted, they and people like them will be among the primary targets, even though they never actually committed fraud; they just failed to understand impossibly complex rules or to identify the DWP’s mistakes.

The DWP must of course crack down on fraud, but it needs to be informed by best practice. On that basis, I believe this Bill needs a significant rethink.

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[The Parliamentary Under-Secretary of State, Department for Work and Pensions (Baroness Sherlock) (Lab)]

My Lords, I thank all noble Lords who have contributed to today’s thoughtful and decidedly not-at-all dull debate. Committee will be some fun indeed. It was a particular pleasure to hear the maiden speech of the noble Baroness, Lady Spielman, whom I welcome to the spreadsheet fan club. Frankly, I could have done with one of her spreadsheets to keep track of all the questions that I have been asked today. In the absence of that I am bound to miss some, for which I apologise in advance, but I will do my best. It is good to have her among our number, and I look forward to hearing more from her in future.

Perhaps we should start briefly with the challenge that the Bill is designed to address. As my noble friend Lady Anderson made clear at the start, public fraud is simply not acceptable—as the noble and learned Lord, Lord Garnier, said, fraud is not acceptable generally, but public sector fraud is also not acceptable. Fraud does not become a victimless crime because it is directed at the state: it will cheat the public purse of money that could be spent on public services, which could help this Government deliver an NHS fit for the future or invest in our children to give them the best start in life.

Listening to some of the examples given by my noble friends Lord Rook and Lady Alexander, it is so shocking that, during Covid, when people and charities were out there breaking their backs trying to serve people who were in desperate need, others were out there lining their pockets. It is a disgrace. It was very moving to hear from my noble friend Lady Alexander about what is happening when people are doing all that they have had to do in the British Council to pay that back when others do not want to pay back the money that they should be paying back to the state. That cannot be right.

I also think that fraud in our social security system is damaging in a different way, whether it is undertaken by individuals or organised criminals. I think the noble Baroness, Lady Kramer, asked what the breakdown of that was. I can tell her that, in 2023-24, of the £7.3 billion lost in fraud in social security, 6% was taken by organised gangs and the rest was taken by individuals.

[Baroness Kramer (LD)]

My Lords, is that the number of cases that were identified because there was enough evidence and people were arrested, or does she believe that that is an estimate of the total amount of organised fraud in the system?

[Baroness Sherlock (Lab)]

It is a percentage of the amount of fraud that was recognised. Clearly, we do not have figures for the amount of fraud of any kind that has not been identified or recognised. That was the figure for the amount we have on our books as organised fraud.

The reality is that, whether it is done by organised criminals or by individuals, this is not okay. It is not fair to taxpayers who fund social security, nor to the vast majority of people who claim only the benefits to which they are entitled. In my job, when money is as tight as it is now, I want every penny available for social security to go to the people who need it most.

This Government are determined to tackle the issue head-on with a Bill that will provide the right tools to protect public money and fight modern fraud, coupled with the right safeguards. The Bill is tough on those who commit fraud against our public services or our welfare state. In doing so, it gives reassurance to taxpayers. One of the side effects is that it will be helpful to DWP claimants who make genuine mistakes, by helping to spot errors earlier so they can avoid getting into lots of debt.

I thought the point made by the noble Baroness, Lady Spielman, about reciprocity was there. If people do not have confidence in our welfare state and the underpinning mutual shared obligations, that challenges our ability to maintain confidence and carry on supporting people in the future. We need to get this right, but we do not need to demonise people to do that. We just need to make it clear that people should get what they are entitled to, and, if they are not getting that, we should address it.

We believe this Bill strikes the right balance, giving the Government new powers proportionate to the problem we are tackling while ensuring that those powers are wrapped around with effective safeguards and protections to give confidence to Parliament and the country. Having said that, and having listened to the debate, I recognise that it is just possible that not everybody agrees with us—or, at least, not yet. We have some way to go. I have every confidence that, once I have fully explained this, there will be unanimity across the House—or near-unanimity at least, being a realist.

Having listened to the debate, it seems to me that there are a number of challenges. First, I offer a couple of truisms. There is no silver bullet to fraud. If there were one single thing to do, the previous Government would have tackled this, or some other Government would have done it. Tackling fraud is an accretion of a series of small decisions which, between them, add up to make a difference. Therefore, this Bill does what it does and does not do other things: it does not tackle bank robbers or tax evasion. It is a contribution, and I think it is an appropriate one.

Secondly, we have to be a bit careful that the best is not the enemy of the good. What is in front of us is action that this Government will take that has not been done before, and I commend it to the House. The challenges that we have seem to come in three broad categories: we are not going far enough, we are going too far, or there are some challenges in the way that we are doing this. I will briefly look at each in turn.

I start with the challenges that we are not going far enough, which have come from a number of noble Lords. The noble Baroness, Lady Stedman-Scott, and I have great respect for one another, but I say very gently that some of the critiques she has made of the Bill strike me as a little ironic, given that the last Government were in for 14 years and had all that time to take action. What did we get? We got one predecessor of one of these measures, which was put in at the fag end of the last Government and dropped into the other place after Committee, with none of the information that the noble Baroness is demanding from me—nothing at all, not even a requirement to produce a code of practice, never mind actually producing one, and absolutely none of the safeguards or protections. Now she is in opposition, I fully respect that it is the job of the Opposition to demand things of the Government, and she does a fine job of doing that. She also will not mind if, in turn, I occasionally throw back at her what her own Government failed to do. In this area, I think we are doing rather better.

Having got that off my chest, let us move on. It is worth saying that this Government are actually doing something. We committed to the biggest-ever savings package on fraud, error and debt at the Autumn Budget. Along with the Spring Statement, DWP fraud and error measures are estimated to achieve £9.6 billion of savings by 2029-30, of which up to £1.5 billion will be generated by this Bill. So this Bill is not all that we are doing, but it is an important thing that we are doing.

The noble Baroness, Lady Stedman-Scott, asked about cost. In the end, the costs of DWP working through these measures will be dependent on the munificence of the Treasury at the spending review, which I am not allowed to pre-empt. The impact assessment sets out our estimate and shows that around four times the benefit of every pound of our departmental spending will come back on scored measures to 2029-30.

On not doing enough, the noble Baroness asked about “sickfluencers”. She is right—it is the view of this department that we have the powers to deal with these crimes at the moment. We think the Bill will help the PSFA to do that at the same time. But, if she has ideas about other ways in which that could happen, I look forward to hearing them, along with her many other ideas for tackling fraud, which I have no doubt Committee will give us every opportunity to discuss.

While I am on the point, the noble Baronesses, Lady Kramer and Lady Stedman-Scott raised the question of whistleblowing. We absolutely agree; we want people to pass on information about fraudsters who are taking from our public services. We are open to keep looking at the best way to do that. We are working with partners such as Action Fraud to make it simple and easy for the public.

In the case of DWP, benefit fraud can be reported by the public online, by phone or by post—and, trust me, it is. But also, DWP staff have clear channels to report. On top of that, the PSFA will look into the possibility of being listed by the Department for Business and Trade as a body with which individuals can raise concerns around public sector fraud. That will help on that side.

While we are on the PSFA, concerns were raised by the noble Baroness, Lady Finn, the noble and learned Lord, Lord Garnier, and others about whether it is doing enough and about the scale. The PSFA’s enforcement unit is relatively new in what it does. The noble Baroness, Lady Finn, was a little a little bit harsh on test and learn. When the enforcement unit is as new as it is and will only with the passage of the Bill get the powers it needs to do any of these things, surely testing and learning is the right thing to do. If it can demonstrate clearly that results come from that, the possibility for scaling will be significant. I promise I am not making any assumptions of the Treasury.

The noble and learned Lord, Lord Garnier, asked whether the Government audit the work of the PSFA and whether the powers in the Bill will add anything. The PSFA publishes annual reports and has benefits audited by the Government Internal Audit Agency. Examples were given in my noble friend’s opening speech of where the PSFA currently cannot make the desired progress because it has not got the powers it needs. The Bill will give them to it.

That is, briefly, the case for not going far enough. Let us now do the going too far case. A number of noble Lords, including the noble Baroness, Lady Fox, to a degree, the noble and learned Lord, Lord Garnier, my noble friends Lord Davies and Lord Sikka, and the noble Lord, Lord Vaux, are concerned about possible infringements on the right to privacy or other aspects of the reach of the Bill. I am grateful to the noble Lord, Lord Vaux, for acknowledging the improvements made by the Bill. I raised a number of reservations when the last Government introduced their third-party data measure, because I felt that the powers were simply not proportionate and that there were not enough safeguards around them.

While I am here, I say to my noble friend Lord Davies that the fact that that we provide safeguards does not mean the powers are wrong. That is what safeguards are for. There are safeguards in all aspects of life. I will come back to that. It means that we want to be transparent and show people that powers the state is taking are used appropriately. That is what they are for. The noble Lord explained the limitations.

We are now limiting the benefits in scope. For all the measures there will be clear limits about what information can be requested, for what purpose, and how the PSFA and DWP will use it. That is all new, and the Bill introduces considerable oversight and reporting requirements.

I believe the Bill strikes the right balance and, in answer to my noble friend Lord Sikka, I am confident that it is complying with the Government’s duties under the ECHR. The Government’s detailed analysis on compatibility is set out in the published ECHR memorandum.

I need to take on a couple of noble Lords who have suggested that this is a sort of broad trawling expedition. It has been described as DWP going out there and trying to have access to everybody’s bank accounts—suspicion-snooping. That is a simple misunderstanding of the nature of the powers. Let me try to explain why. DWP will not be given access to people’s bank accounts by this measure, which is about banks being asked to examine their own data, which they already have and can already look at. They have been asked to provide DWP with the minimum amount of information necessary to highlight whether there is a possibility that someone may not be meeting a specific eligibility rule for a specific benefit. At the point the information is shared with DWP, no one is suspected of having done anything wrong. The presumption of innocence is still there.

Public Authorities (Fraud, Error and Recovery) Bill

Baroness Kramer Excerpts

Committee stage
Wednesday 4th June 2025 Grand Committee

Moved by

[Baroness Kramer]

3: Clause 1, page 1, line 13, at end insert—
“(e) creating a whistleblowing reporting channel for cases of fraud against public authorities which—(i) guarantees confidentiality and anonymity if requested,(ii) includes clear definitions of who is a whistleblower in cases of fraud against public authorities,(iii) provides a process to update whistleblowers in cases of fraud against public authorities, and(iv) protects whistleblowers in cases of fraud against public authorities from retaliation and detriment.”

[Baroness Kramer (LD)]

My Lords, I congratulate the noble Baroness, Lady Anderson. In the eyes of this Committee, coming here today on her honeymoon to lead on the Bill demonstrates that she is a true romantic.

The amendments in this group, both of which are in my name, are probing amendments, and they are designed to create a whistleblowing channel in the PSFA. Amendment 3 is more general, but Amendment 66 would specifically set up an office of the whistleblower. Expanding the role of the Public Sector Fraud Authority without creating an appropriate whistleblowing channel seems an opportunity seriously missed. The Cabinet Office, with its wide reach, is exactly the right place to put an office of the whistleblower to tackle public sector fraud.

At Second Reading I spoke of the change in attitude towards whistleblowers by both regulators and enforcement agencies. Many now see whistleblowers as crucial to their effectiveness. I will not repeat a Second Reading speech; I ask the Minister not to take my word for this but to speak directly to the Serious Fraud Office, to HMRC’s tax office and to the Covid commissioner. I hope the Government will respect what these organisations have learned out in the field about tackling fraud, and that will lead her to see the significance of creating an appropriate whistleblowing channel.

However, I want to address what seemed to be some misapprehensions from the Minister’s speech at Second Reading. She seemed to be of the view that the national benefit fraud hotline is a sufficient whistleblowing channel. As far as I can tell, it funnels information, usually anonymous, to DWP, but there is little or no follow-up with the individual who has reported. Whistleblowing is a process. Initial reports lead to further exchanges and often to the gathering of information and evidence. That is why it is so valuable. The hotline today simply is not sufficient, and that is one of the reasons why fraud is so prevalent.

The Minister also said that only 6% of benefit fraud is linked to organised crime, and I find that impossible to believe. The Police Foundation recently did a major piece of research and concluded that 30% to 45% of fraud is linked to organised crime. That is way above the levels previously estimated anywhere across the piece before that report came out. It is now regarded, in a sense, as the masterpiece of research in this area.

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Given the intent to maintain the focus of this legislation and the steps being taken by PSFA to improve the whistleblowing offer for public sector fraud, I hope that the noble Baroness, Lady Kramer, can withdraw her amendment at this stage. I commit to ongoing conversations to see what improvements we can make and where.

[Baroness Kramer (LD)]

My Lords, I thank the noble Lord, Lord Maude of Horsham, and the noble Viscount, Lord Younger of Leckie, for rowing in on this issue of real significance. I also thank the Minister, who is clearly taking these issues on board, thinking them through and looking for a way to progress. I would love the opportunity to meet her to explore where I can be helpful.

I want to challenge a couple of issues raised by the noble Viscount. The cost is often raised when we talk about creating a specific office of the whistleblower. But in the United States there are offices of whistleblowing in the Securities and Exchange Commission, the CFTC and the Department of Transportation, for example. Every single one of them is now regarded by the US Department of the Treasury as a profit centre, not a cost centre. Their effectiveness in bringing people to trial and achieving fines is so significant that they not only pay for themselves but flow money up into the Department of the Treasury. HMRC has very similar experience. It is now proposing significant financial incentives for whistleblowers on the grounds that this will allow the recovery of lost tax to a degree that will more than pay for the process. There is a real set of questions there.

I fully accept that there are many ways in which to do this but I am feeling heartened by the broader receptivity around this issue. I do not think that there is one template that works for all, but there certainly can be a template that would work well within the context of the work that the PSFA will do. On that basis, I beg leave to withdraw my amendment.

Amendment 3 withdrawn.

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

My Lords, this has been a very useful debate, and I hope to be able to give some clarity on some of the issues that have been raised. It would be remiss of me, and I should have done it earlier, not to thank the noble Lord, Lord Maude, for starting the process of where we have ended up today. He and the noble Baroness, Lady Finn, started a great deal of this under the previous Government. We are now seeking to ensure that the PSFA has the appropriate powers to deliver what they started.

Before I move on to the substance of this group, I think it would be helpful to respond to a question that was touched on by the noble Lord, Lord Palmer, about what a public authority means with regard to the Bill and what we are actually talking about. Public authority is defined in Clause 70 “Interpretation”. The definition is:

“‘public authority’ means a person with functions of a public nature so far as acting in the exercise of those functions”.

It would include, for example, other government departments, arm’s-length bodies and local authorities. This is a broad definition that takes in a wide range of organisations and delivery mechanisms for public functions to ensure that fraud against the public sector in its widest sense can be tackled.

Whether a body comes into the definition of public authority will be tested before a case is adopted, but let us be clear that, especially when we are talking about fraud, it would be surprising if someone was targeting the public sector and they stopped at the remit of one government department just because we define it as one government department. We all know, and noble Lords who have served in government are even more aware, that MHCLG, the Cabinet Office, the DfE and the Department of Health will have multiple users that may touch on different levels of fraud, which is why it is important that we have the breadth of definition.

On the substance of this group, Amendment 4 would remove error from the scope of the amounts that the Minister can recover. This would significantly change and restrict the scope of the PSFA’s recovery function. It would mean that, if the PSFA investigates a case and does not find fraud but does find that a person has had money that they were not entitled to, it would not be able to take action to recover it, including using the debt powers in the Bill. The PSFA would have to refer the matter back to the public authority concerned to take whatever error recovery actions it is willing and able to take.

In response to concerns raised by many noble Lords, including the noble Baroness, Lady Fox—I am pleased that I was able to make her happy at the beginning of Committee stage—it is very likely that the PSFA will encounter payments that could be classed as error. Fraud and error are difficult to separate. Indeed, the National Audit Office and the PSFA do not attempt to do so in their measurement methodology. This is because proving fraud requires evidence of intent, and it is often impractical or impossible to do so. One of the purposes of the Bill is to do more to evidence fraud and take the right action to tackle it, but I hope noble Lords will agree that when you have money that you are not entitled to, you should pay it back and it should be recoverable if it is not paid back. That has always been a principle that the Government have adopted.

Before I move on to wider detail, I want to touch on some comments made by the noble Baroness, Lady Finn, on the loophole for public authorities. Public authorities are the victims, not the perpetrators. Even without powers, the PSFA enforcement unit is getting referrals. We do not foresee a shortage of cases coming our way. The PSFA must be able to triage and pursue the most impactful and value-for-money cases. This is a genuine question—which is why we are here in Committee—of culture and approach, and one that we should have a conversation about. The Government genuinely believe that a collaborative approach with other government departments will yield more co-operation in terms of investigations than a more aggressive approach. Being invited in will ensure that government departments actively engage with us, as has proven to be the case during our pilot so far.

I believe it will assist your Lordships’ Committee if I briefly set out the circumstances in which a public authority would recover an amount of money. Accounting officers of public authorities are required to follow the principles set out in the HM Treasury publication Managing Public Money in annexe 4.11, which is— apparently—readily available to noble Lords. The relevant section states:

“Most organisations responsible for making payments will sometimes discover that they have made overpayments in error. In principle public sector organisations should always pursue recovery of overpayments, irrespective of how they came to be made. In practice, however, there will be both practical and legal limits to how cases should be handled. So each case should be dealt with on its merits”.


Amendment 5 would remove the words:

“only at the request of that public authority”

from Clause 2(1). I believe the intention of this amendment is that PSFA should be able to simply decide to open a fraud investigation irrespective of the wishes of the target of fraud, in the same way that the police can open an investigation into other crimes. However, omitting the deleted words but not otherwise changing the clause would create an element of uncertainty over who is responsible, in the first instance, for dealing with fraud against a public authority. At the moment, it is clearly the public authority. If the intention of this amendment is that it should be for the Minister for the Cabinet Office to decide to investigate, whether or not the public authority wants the Minister to step in, this may conflict with the preservation of public authorities’ own fraud functions in Clause 2(5)(b).

Responsibility for managing fraud is, in the first instance, given to accounting officers of public authorities, as set out by Managing Public Money annexe 4.9—which I am sure all noble Lords have read. There may also be other unintended consequences by the adoption of this amendment, specifically whether the revised working of the clause might actually compel the Minister for the Cabinet Office to investigate all public sector fraud. That is something beyond the current capacity of the PSFA, which I am sure we will discuss in great detail later in Committee. If the PSFA finds fraud off its own bat, as it were, it might not then be clear on what legal basis, if any, it would be able to recover it, as it would not be acting on behalf of the public authority per se. The Government seek to maintain the status quo of acting at the request of public authorities as a matter of operational practice as set out in this Bill, in order to prevent any confusion.

The noble Lord, Lord Maude, raised a query about the Treasury not taking this seriously. The PSFA reports to the Cabinet Office and HMT. It works closely, advising HMT on fraud as part of the spending review process. I hope that that is somewhat reassuring, given where we are in the spending review process.

Amendment 6 would remove the restriction in Clause 2(2) on the PSFA undertaking cases at the request of the DWP and HMRC. This would be a significant change in policy intent. HMRC and DWP have 84% of the counterfraud resource across His Majesty’s Government, including thousands of people and their own designated powers. The PSFA role envisaged is supporting those departments which do not have well-developed fraud investigation, enforcement and recovery functions or powers, not seeking to subsume those with targeted powers that are already well established. For once, this is a government department not seeking to gather other people’s power and staff. Neither HMRC nor DWP need the further assistance of Part 1 of this Bill and there are many other public authorities which do.

[Baroness Kramer (LD)]

If the Minister does not mind, can I pick up the issue that the noble Lord, Lord Maude, raised? Nobody knows how to manage government more closely than him; he is deeper steeped in this than any of us. How does the Minister anticipate dealing with the fragmentation of investigation? If HMRC is chasing down someone, you can almost be certain that it will be dealing with public procurement in a different way and that there will be other issues around that particular entity. Is there a mechanism she sees that will break down those siloed lines?

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

I reassure your Lordships’ Committee, particularly the noble Lord and the noble Baroness, that the PSFA and HMRC or the DWP can and will do dual investigations and work closely together. They have their own powers. I think the case of HMRC is probably more relevant than the DWP, but they will work collaboratively and do joint operations while having their own separate remits. It is not that they will not work together; however, we anticipate that especially where there is evidence—as I said earlier, it is about breadth of government—we would expect the majority of the PSFA’s work to be outside of those government agencies or public authorities.

Amendment 7 is unnecessary because it straight- forwardly duplicates matters already dealt with elsewhere in the Bill. Clause 1(1)(a) states that the Minister is given the function of investigating “suspected fraud” against public authorities. Clause 70, the interpretation clause, defines “suspected fraud” as

“conduct which the Minister has reasonable grounds to suspect may constitute fraud”.

I hope that the noble Baroness, Lady Finn, is content that the issues she raises in this amendment are appropriately dealt with.

Finally, Amendment 8 would restrict the fees that the PSFA could charge a public authority for investigation, enforcement or recovery action to no more than the amount that is recovered. Cash recovery is the hardest part of enforcement. Many initiated investigations will close without reaching the recovery stage—for example, because no fraud is found, an alternative approach is taken or because recovery is not possible even if the investigation is successful. The amendment would mean that no fee could be charged in those cases, despite the PSFA having necessarily invested resources into the investigation with the agreement of the public authority to have taken the case and undertaken the actions in the first place. That does not represent good value for money and runs contrary to the guidance in Managing Public Money on cost recovery.

In the most serious cases, cash recovery may not be the main or even a major factor; it will be the disruption of criminal gangs and prosecution of serious offenders. Such cases may be long, complex and multi-agency, and costs will probably exceed any potential recovery quite quickly. In cases of organised crime, assets may be irretrievable, laundered beyond reach or overseas. The public interest in investigation is to punish the criminals. The adoption of this clause would also fail to acknowledge or promote the deterrent effect of the investigations. The PSFA cannot be restricted in the cases that it selects by how much of its costs it can recover; that is counterproductive and counterintuitive.

I have two other points to raise.

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

There is a balance here, because of the positives that go alongside this. There is a genuine issue that, if a criminal gang is actively targeting a public authority, the investigation and prosecution of those people in itself is something that the public authority would wish to see. There will always be costs involved in criminal activities, even if they cannot all be recovered. The police actively investigate criminal gangs, with the pragmatic understanding that not all costs can be recovered. There is also a deterrent effect in prosecuting people to ensure that everyone is aware that, if you defraud the state, you will be prosecuted. We will not always be able to get the money back, but we must be realistic about what is in front of us and what we can achieve.

[Baroness Kramer (LD)]

I have not thought this through, but a no win, no fee approach seems quite useful. If the PSFA, which will have many successful prosecutions where it brings in fees that are well above its actual costs, it will have a resource that will surely allow it to pursue cases where there is not a successful recovery but where it is important for the case to go ahead. I am just wondering whether there is not a model that might work more effectively.

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

The noble Baroness makes an interesting point. That is why the Cabinet Office and the PSFA are adopting a test-and-learn approach to see what will and will not work. Having said that, we have to be realistic that we will not always be able to recover funds and someone has to pay for the cost of the investigation. The balance of what that looks like is something we will have to explore as cases progress.

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[Lord Vaux of Harrowden (CB)]

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

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

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

[Baroness Kramer (LD)]

My Lords, I will just pick up the issue that has been raised by the noble Lord, Lord Vaux. We are dealing tomorrow with a statutory instrument that attempts to provide safeguards against banks and other organisations deciding to close people’s bank accounts or to deprive them of other financial services. It is often the people who are under the most financial pressure who find it difficult to get banked in the first place. They can get a basic bank account if they are lucky, but to get a bank account with any of the features that make financial life reasonable is exceedingly difficult. I therefore share the noble Lord’s concern that we do not start a hare running.

Banks are eager to offload people who do not have a lot of exciting and interesting activity. If this notice gives them an excuse to do that, I can see that an awful lot of banks will seize that opportunity, so I raise this as an issue to be wary of. In fact, we have an SI going in the opposite direction tomorrow, so this is really for the Government to make sure that one hand knows what the other hand is doing.

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

My Lords, I apologise in advance, because I think we are about to have a vote—or not, if the noble Baroness, Lady Kidron, does not press her Motion.

Some significant points have been touched on in this very short debate. I will respond to each amendment in turn. Amendment 9 looks to introduce a test of reasonableness to determine whether an authorised officer has appropriately considered that information sought is both necessary and proportionate. Clause 3(1)(a) and (b) already set out the test for issuing an information notice: an authorised officer will have the power to compel information only when it is necessary and proportionate to do so, and only when the information being requested relates to a person whom an authorised officer has reasonable grounds to suspect has committed fraud.

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[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?

Public Authorities (Fraud, Error and Recovery) Bill

Baroness Kramer Excerpts

Report stage
Wednesday 15th October 2025 Lords Chamber

Moved by

[Baroness Kramer]

1: Clause 1, page 1, line 13, at end insert—
“(e) creating a whistleblowing reporting channel for cases of fraud against public authorities which—(i) guarantees confidentiality and anonymity if requested,(ii) includes clear definitions of who is a whistleblower in cases of fraud against public authorities,(iii) provides a process to update whistleblowers in cases of fraud against public authorities, and(iv) protects whistleblowers in cases of fraud against public authorities from retaliation and detriment.”

[Baroness Kramer (LD)]

My Lords, I have tabled Amendments 1 and 20 in this group to raise again the issue of whistleblowing. Sadly, I do not think it is necessary to repeat in any detail why the existing whistleblowing framework is completely inadequate. We have to look only at the scandals of the Post Office, contaminated blood, Letby, the Hillsborough cover-up, the fake costings for HS2, the mis-selling of PPI, mini-bonds and now car finance. Those are just a few of the very real outrages and tragedies that could have been nipped in the bud if we had had a system that, in actuality and effectively, protected whistleblowers who spoke out and ensured the investigation of their disclosures. Most importantly, the victims of these many scandals would have been spared, but also the taxpayer would have been protected from huge compensation payouts.

I believe strongly that the Public Sector Fraud Authority, sitting as it does under the Cabinet Office and with its investigative powers, is very well placed to be the hub of a proper framework—I would call it an office of the whistleblower, but that is not a precious issue—and at least to act as a hub for whistleblowing protection and investigation across the whole of the public sector. It could provide proper guidance to government departments and agencies, set standards for proper whistleblowing protection and redress, ensure investigation when appropriate, and provide the consistency, clarity and ease of use that are essential to effectiveness.

I realise that the amendments I have tabled are inadequate to this task, and what I seek from the Government is a conclusion that there is real progress in this direction. The Government have increasingly recognised the importance of the issue, and the Minister herself—I have to give her real credit—has commendably talked about the importance of whistleblowing. Collectively, the House has made progress in the Employment Rights Bill on limiting the abuse of non-disclosure agreements and in the Armed Forces Commissioner Act in developing a whistleblowing framework for the commissioner which will possibly extend to all of defence.

In the context of fraud and whistleblowing, we currently await the second part of the Fisher review of disclosure and this Bill contains provisions for an independent review of the Minister’s functions, so there are tools available to the Government. For this Government, as for any other, there is always the risk that, without change, new scandals will occur and those would then be laid directly at their door. Nobody wants that. This is an area where all parties should be co-operating and not competing. I look forward to hearing the Minister’s reply and hope to conclude that progress is seriously being made.

[Baroness Finn (Con)]

My Lords, I begin by thanking both Ministers opposite, and noble Lords from across the House, for their engagement with us on the substance of this Bill since we entered Committee. We have had some very valuable discussions and I welcome that the Government have approached this with a view to compromise and listening to noble Lords from across the House on the Bill. I hope we can conclude Report in the same spirit and I look forward to the discussions we shall have in these sessions.

We on these Benches welcome that we are starting Report by discussing an important issue, and I thank the noble Baroness, Lady Kramer, for bringing forward these two amendments. Both amendments speak to a common principle that individuals who come forward with evidence of wrongdoing should be able to do so safely, confidently and with the assurance that their actions will lead to meaningful action rather than personal detriment.

The decision to do the right thing and report wrongdoing is far from an easy one for anyone to make. To come forward with evidence of fraud is often to put oneself at considerable risk of losing employment, damaging one’s reputation or straining relationships. If we expect people to do the right thing then it is incumbent on us to ensure that the system does right by them in return. Whistleblowers are very often the first line of defence against fraud. They can identify irregularities and provide information that would otherwise remain hidden—information that the Public Sector Fraud Authority will need in order to act swiftly and effectively. That is why it is so important that individuals know that they will be listened to, supported and protected. Only then will they feel able to come forward and only then will we be able to tackle fraud before it escalates.

In addition to the channels set out in Amendment 1, this principle links directly to the second amendment before us, Amendment 20, which proposes the establishment of an office of the whistleblower for public sector fraud. The purpose of such an office would be to oversee and safeguard the process of whistleblowing, to ensure that concerns are acted on and that those who raise them are not left exposed or ignored. We understand that the noble Baroness has likely brought this proposal to emphasise the importance of the issue rather than to suggest this particular structure as the final answer. We shall, of course, be very interested to hear how the Minister will meet the challenge set on this question.

As the noble Baroness, Lady Kramer, set out, whistleblowers can operate effectively only when they know that their efforts will not be in vain, that the authorities will respond and that the risks they take will not go unacknowledged. In the specific context of this Bill, that raises a very practical question that relates to the amendment we have brought to Clause 2. If a whistleblower were to bring actionable evidence of fraud to light, would the Public Sector Fraud Authority be able to act on it directly, or would it still have to wait for a formal invitation from the relevant department or authority before beginning an investigation? Our reading of the Bill suggests the latter, and if that is the case then the system risks leaving whistleblowers stranded, even when they have provided precisely the sort of information that this legislation is intended to uncover.

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

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

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

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

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

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

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

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

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

[Baroness Kramer (LD)]

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

Amendment 1 withdrawn.

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

My Lords, I cannot help thinking that if one of us was in Santorini and the other one was here tabling amendments, I may have got the raw end of the deal—although it is possible that my noble friend’s husband might not agree with that.

The government amendments in this group contain a series of further safeguards for individuals who are subject to the new debt recovery powers in Parts 1 and 2 of the Bill, specifically in relation to direct deduction orders to recover from bank accounts and deductions from earnings orders to deduct from PAYE salaries in Part 1. Before I address them, I add my thanks to noble Lords from around the House for what has been a constructive consideration of the Bill so far. I hope that these government amendments will help to add to that sentiment.

Government Amendments 8, 9, 93 and 94 seek to clarify the obligations of financial institutions not to disclose that they have received an information notice under the new power enabling direct deduction orders—DDOs. Under the debt recovery provisions in Parts 1 and 2, financial institutions are prohibited from informing account holders that the PSFA or the DWP has requested account information. This is to militate against attempts to avoid the powers—for example, by moving money out of the account before a DDO is issued.

These amendments clarify that the prohibition ends three months after the notice is given to the bank, or sooner if a pre-deduction notice is subsequently given. Three months is long enough for the DWP or the PSFA to have assessed a debtor’s ability to repay and the affordability of repayments, and to issue a first notice as appropriate. These amendments remove any doubt as to how long the prohibition lasts, ensuring the requirement is proportionate and not overly burdensome.

It is only during the time that account information is being considered that the prohibition applies. Once the information has been properly assessed and any pre-deduction notice given to the bank, account holders can be told that the information was requested. Where a DDO is proposed, the account holder, and a joint account holder if applicable, will be notified in writing by the PSFA or the DWP of their right to make representations regarding the proposed deductions before any are taken.

Government Amendments 12, 13, 98 and 100 are in response to our further engagement with the financial services sector. They seek to clarify the responsibilities of the PSFA, the DWP and financial institutions with specific regard to legal deputies who might be managing the affairs of a debtor subject to a DDO. Since Committee, we have continued to benefit from the insight provided by the financial services sector, and we want to provide as much clarity as possible on respective roles and responsibilities. These amendments will help ensure that the implementation of these measures is straightforward and that the Government can recoup money lost to fraud and error in an efficient and effective manner. Government Amendments 12 and 13 simplify the drafting of Clause 37 and remove redundant provisions. Amendments 97 and 98 do the same thing for Schedule 5.

Government Amendments 14 and 99 are consequential to Amendments 11 and 96, limiting the suspension of DDOs, which I will come to in a moment. They mean that, where an order has been suspended for two years and is revoked, the PSFA and the DWP will now have an obligation to inform a deputy, if there is one in place.

Government Amendments 15 and 100 create a requirement for a bank to provide the PSFA and the DWP with the details of any deputy acting on behalf of an account holder, where these are known to the bank, when certain notices or orders are issued to them. This was implicit before but, at the request of the banks, we are making it explicit that this includes the name and address of the deputy.

Collectively, these amendments are important to ensure that roles and responsibilities are clear for the minority of cases where there is a legal deputy in place when the PSFA or the DWP uses DDOs.

Government Amendments 11, 18, 96 and 99 address an issue raised at Second Reading by lots of noble Lords. I am happy to be able to respond to those comments here. The Government are committed to being fair and transparent in the use of these new powers, and it is completely reasonable that, where an individual has an order in place and it is suspended, it should not be suspended indefinitely. We are therefore introducing new provisions under government Amendments 11, 18, 96 and 99 to remove that uncertainty for those individuals so that they know exactly where they stand and to ensure that an order cannot be restarted if the suspension goes on for more than two years. I am grateful to noble Lords for having raised this.

It was never the Government’s intention for a suspension to be indefinite, but it is right to offer greater clarity and certainty in the law itself. The PSFA or the DWP will inform debtors of any changes to their payment arrangements. If an order is suspended, the debtor will be notified. In cases where a DDO is revoked, both the account holder and the relevant bank will receive written confirmation from the PSFA or the DWP. That reflects our continued commitment to supporting individuals in managing their debt and introduces important safeguards to ensure transparency and fairness.

I turn to the final government amendments in this group, Amendments 10 and 95. I again thank those in the financial services sector who have worked closely with us in the development of this Bill. We are committed to working collaboratively with the sector to ensure that the Bill enables banks to meet their legislative obligations while minimising burdens where possible.

The cost of meeting obligations under the Bill has been an area of interest to the House, and noble Lords have made the point in earlier debates that those helping to enforce the law must be supported. I agree with them on this. Therefore, these government amendments remove from Clause 26 and Schedule 5 the requirements on financial institutions to prevent account holders closing their accounts upon receipt of a pre-deduction notice or DDO from the PSFA or the DWP.

The original policy intent was to reduce opportunities for debtors to frustrate the DDO process, and that remains our objective. However, this requirement would not stop debtors who are persistent in evading repayment simply redirecting their funds to another account. We know from our engagement with the financial sector that complying with the requirement to prevent account closures risks creating a significant burden for some banks.

We reflected on that feedback and the fact that both parts of the Bill already contain further safeguards against bad actors who might wish to take action to frustrate a DDO. In Part 1, Clause 27 places a restriction on the account holder not to do anything that might frustrate the effect of the pre-deduction notice or the order. If they do, they become liable to pay a civil penalty. In Part 2, Schedule 6 contains provisions for the DWP to apply to the court for a suspended disqualification from driving order in the most serious cases where, for example, someone persistently fails to pay by frustrating a DDO.

Removing the requirement for financial institutions to prevent account closure upon receipt of a pre-deduction notice or DDO avoids placing new, costly burdens on some banks while still enabling the DWP and the PSFA to address effectively the small number of debtors who deliberately and persistently evade repaying taxpayers’ money. I beg to move.

[Baroness Kramer (LD)]

My Lords, obviously we are pleased to see these amendments. We want to look much more closely to understand how far they go to meet some of the concerns expressed by my noble friend Lord Palmer earlier in the process of the Bill. I have an amendment in a future group that reflects our deep concern, particularly at the absence of transparency. The very thought that the original legislation essentially meant that people would have no idea that account statements had been handed over to the investigators—not only during the period when the investigation might be active but they would be permanently kept uninformed that their information had been handed over—felt to us like a complete breach of the rights of the individual, fundamentally breaking the bond of trust between a banking institution and its account holders.

We will want to look closely at these amendments and their implications. We may return to this issue at a later stage, but at this point we are glad that the Government are taking steps to deal with some of the features that most concerned us.

[Lord Davies of Brixton (Lab)]

My Lords, I expressed considerable concern about this part of the Bill in Committee. I have studied the amendments that have been put forward and, like the noble Baroness who has spoken on behalf of the Liberal Democrats, will reserve my position, since we can come back to this. The amendments, which we have been told came forward last week, seem like an improvement, but the question is whether they are sufficient. It is easy to spot what is there; the most difficult part of the process is spotting what is not, and I need a bit more time to achieve that. So, although I am in no sense speaking against the amendments, I am reserving my position on the overall effect of this clause and the objections that I raised in Committee. I will say a bit more on the next group of amendments, which are more germane.

Public Authorities (Fraud, Error and Recovery) Bill

Baroness Kramer Excerpts

Report stage
Tuesday 21st October 2025 Lords Chamber

[Lord Vaux of Harrowden (CB)]

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

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

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


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

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

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

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

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

[Baroness Kramer (LD)]

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

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

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

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

[Lord Sikka (Lab)]

My Lords, I will say a few words about Amendment 60. I thank the noble Baroness, Lady Bennett of Manor Castle, for her support.

My concern is about justice. People on the receiving end of DWP penalties and accusations of fraud will predominantly be old, sick, disabled and the poor. Most would not be able to afford legal advice or qualify for legal aid, which is scarce in any case. DWP actions and penalties could arise because people have made errors in completing very long and complex forms. For example, the pension credit form is 24 pages long and has 243 questions on it. Errors can be made in completing the forms and interpreting the questions on them, and in the DWP’s assessment of the answers given to those questions.

There is a high probability that some people may eventually be unjustly accused of committing fraud and face the removal of money from their bank accounts without their express approval. It will be the might of the state on one hand and a poor person who does not have any legal advice on the other. We know from the Post Office scandal that innocent individuals can be pressurised into admitting fraud that they did not commit and into handing over money that they did not steal or do not owe. There is enormous scope for injustice in the Bill.

The 2023 High Court case of R v Secretary of State for Work and Pensions related to a single mother of two disabled adults who was receiving universal credit and was overpaid by £8,623, entirely due to the fault of the DWP. The DWP sought to recover the money. The High Court’s judgment said that, under certain circumstances, benefit claimants may be able to argue that recovering the debt would be an unlawful breach of their legitimate expectation and the debt need not actually be paid. Would many claimants who are accused of committing fraud or receiving overpayments be aware of these things?

Steve Webb, the former Pensions Minister, said:

“It can be difficult for people to understand whether the demands they are being sent for overpayments are a mistake, as benefits such as tax credits and pension credit are so complex”.


Without legal advice, these people become even more vulnerable.

Last year, a lot of press coverage was given to the plight of a 75 year-old pensioner who was chased by the DWP for pension credit fraud, adding up to £22,000. The Sun newspaper took up the case, and eventually the investigation showed that there was no fraud—it was all due to errors by the DWP. This case, obviously, is not unique; there are many others that do not get the publicity. I cannot help wondering how many people over the years have been pressurised into admitting guilt when they are not guilty. How many more will admit guilt when they are simply pressed into it?

Last year, data secured by Big Brother Watch showed that more than 200,000 people wrongly faced investigation for housing benefit fraud and error after the performance of the Government’s algorithm fell far short of expectations. Earlier this year, 30 charities wrote to the Government, pointing out the dangers of this legislation and previous legislation, and they identified 686,756 new official error overpayments on universal credit.

Eventually, at some point, people who are accused need some advice. Amendment 60 suggests that the Government ought to provide legal advice to people who may well qualify for it. On 9 October this year, the Government announced that all victims of the Post Office Horizon IT scandal who are claiming compensation will be entitled to free legal advice. Why wait until people suffer? Why not offer this advice up front to save anguish to millions of people? That is what a civilised society would do.

I am sure the Minister will not support this and will possibly refer to the cost associated with it, but the cost of injustice is even higher. I hope that the Minister will be able to offer some help with this.

Public Authorities (Fraud, Error and Recovery) Bill

Baroness Kramer Excerpts

Report stage
Tuesday 21st October 2025 Lords Chamber

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

My Lords, I shall speak to government Amendments 89, 91, 101 and 102; I start with Amendments 89 and 91. I tabled these amendments because it has been clear that, despite all my attempts to reassure noble Lords at earlier stages, concerns continue to be raised as though DWP’s new recovery powers could be applied to debtors who are in receipt of benefits. Indeed, I think that may be the concern of the noble Baroness, Lady Kramer, as the explanatory statement on her Amendment 92 in this group relates to the use of these powers on benefit claimants. To be clear, this is not the case.

The DWP’s new debt recovery measures can be applied only to debtors who are no longer receiving DWP benefits and where we cannot recover from PAYE. However, to further reassure noble Lords and everybody else, we are making it even clearer in the legislation, through new Section 80AA, that the new powers cannot be applied to those receiving benefits from my department. This provides further clarification that a direct deduction order or immediate disqualification from driving order must always be suspended or revoked if the debtor subsequently receives a benefit payment from the DWP while that order is ongoing. I hope that provides further assurance to the House.

Amendment 101 is a procedural amendment regarding the technical mechanisms for DWP to make applications to the court for disqualification orders. The Bill already allows DWP to make an application to the magistrates’ court for a suspended or immediate DWP disqualification order. The purpose of this amendment is to introduce a regulation-making power enabling DWP to set out at a later stage any practical steps necessary for those applications to be made and considered. This engages commonplace procedure rules, dealing with practical matters to ensure cases are progressed fairly and efficiently for all parties involved, such as the type of form used or how notices and orders are served on parties.

Amendment 102 is a technical amendment which ensures that the term “processing” is correctly understood in new Section 80D, which establishes the DWP debt code of practice. It is a small change to provide clarity by linking the term “processing” to the definition already set out in Section 3(4) of the Data Protection Act 2018. This helps avoid any ambiguity in interpretation and ensures consistency with existing data protection legislation.

None of these government amendments changes the existing policy intent for how the powers will be used or the safeguards that are set out in the Bill. These will continue to be powers of last resort, to be used only after DWP has made all reasonable attempts to negotiate an affordable and sustainable repayment plan. These amendments support the policy intent and delivery of the Bill, and I urge noble Lords to accept them. I beg to move.

[Baroness Kramer (LD)]

My Lords, I will be very brief. I laid Amendment 92 in the same spirit as the amendments that I laid in an earlier group. The part of paragraph 3 of Schedule 5 that I find most difficult is a subset of the requirement for banks to provide information. The overarching requirement instructs banks to hand over to the Government, on request, three months of account statements for them to examine. The schedule says that the information must be used only to help determine whether or not to make a deduction under the Bill. I was trying to find out from the Minister what assurances there are that the use will be that narrow. It may be that I have misread it, but I cannot see any form of transparency or accountability that would provide that kind of assurance. It all seems to be completely internal to the DWP. My first question to the Minister is therefore this: how will the scheme verify that the information is not used for other purposes, because detailed account statements undoubtedly have information that could interest all kinds of people? Most importantly, will that information be destroyed after an investigation is closed?

The part of paragraph 3 that exercised me the most, in the original language of the Bill that came from the Commons, is that which prohibited banks from ever notifying the account holder that their information has been handed over to the state and for what purpose. To the Minister’s credit, that now seems to have been amended to say that the account holder can be told after three months. I am unclear whether that is an automatic notification, notification at the bank’s choice, or notification that requires a request from the account holder. To me, this matters, because I suspect that transparency is the only way to ensure that the information in the account is not used for purposes other than those stated in the Bill.

I am generally exceedingly uncomfortable with the idea that the original version basically required a sort of covert process, in which the information held on an individual by the state was not disclosed to that individual. The Minister has often suggested that the monitoring of accounts is to start a dialogue to see if a person has made a mistake in overclaiming rather than committing fraud. If somebody is not told that their information has been taken, read through, examined and dealt with in detail, I cannot see how they can possibly enter into a constructive discussion to explain what is happening.

I want to draw the attention of the Minister to an underlying principle. Jonathan Fisher KC has published part 1 of an independent review of disclosure and fraud offences, which was commissioned by the Government. I want to quote his words on transparency, because it seems that transparency was not built into the original Bill and is still limited in the revised version. He said that:

“A modern disclosure regime must require the prosecution”—


he is talking about the courts—

“to be honest concerning the reasonable lines of inquiry that have been pursued and how investigative material has been gathered, handled, and interrogated”.

I would very much like to see those principles embedded in this part of the Bill. I think we need assurances from the Minister that if we cannot find the language then they will in practice be embedded in this part of the Bill, because transparency is fundamental.

[Viscount Younger of Leckie (Con)]

My Lords, the amendments in this group tabled by the Government contain a mixture of substantive safeguards and some technical improvements designed to tidy up and clarify the Bill.

The main amendment, government Amendment 91, introduces further restrictions and procedural safeguards around the use of the new recovery methods created by Schedules 5 and 6. It requires that liable persons are properly notified and given an opportunity to settle their liability before enforcement action is taken, and that alternative routes of recovery, such as deductions from earnings or benefits, are considered before more intrusive powers are used. These are sensible and welcome provisions that strengthen procedural fairness and ensure that the new powers are exercised proportionately.

We do, however, note that these changes have come rather late in the passage of the Bill. They are substantive clarifications, going to the heart of how these powers will operate in practice. However, I listened to the explanations from the Minister on an earlier point I made about this and I now understand her position—while not necessarily agreeing with it, I understand it.

The group includes two largely technical amendments. The first, to Schedule 6, allows the Secretary of State to make regulations relating to applications to or appeals from magistrates’ courts in England and Wales, ensuring clarity and consistency in procedure. The second, to Clause 94, aligns the Bill with the Data Protection Act 2018 by confirming that “processing” has the same meaning as in the Act. This is a straight- forward but important clarification. It is my view that these amendments strengthen the fairness and clarity of the Bill, ensuring that it operates in a way that is proportionate, consistent and aligned with existing law. We therefore support them.

On Amendment 92, tabled by the noble Baroness, Lady Kramer, she may not be surprised that we do not support this amendment. It would remove a key part of the machinery that underpins the operation of this Bill—specifically, the ability of the Department for Work and Pensions to obtain limited, relevant bank information to determine whether a direct deduction order should be made. I realise that this chimes with the noble Baroness’s earlier Amendment 45A, so I will not repeat the comments I made then, save to say that this is a considerable change and would strike at the heart of the framework that enables the recovery of money lost to fraud and error.

The Government must have the legal capacity to verify whether an individual is eligible for the payments they are receiving and whether further action is required to prevent overpayment or recover funds that are owed to the state and, by extension, to the taxpayer. If a person receives money from the state, the state has both the right and the duty to ensure that this money is not being misused—and certainly is not ending up in the pockets of fraudsters or criminals. The Minister has already made clear that individuals in receipt of benefits will be informed that the Government may access certain account information for the purposes of investigating suspected fraud or error.

We are satisfied with the Government’s assurance that the information obtained under these provisions will be high level, proportionate and strictly limited to what is necessary for the purpose of recovering money lost to fraud and overpayment. Far from being excessive, the powers set out in this part of the schedule are a necessary and measured tool to protect public funds. For those reasons, we oppose Amendment 92.