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.