Data Protection and Digital Information Bill

Baroness Sherlock Excerpts

Committee stage
Monday 22nd April 2024 Grand Committee

[Baroness Sherlock (Lab)]

My Lords, I thank the noble Baroness, Lady Kidron, and my noble friend Lord Sikka for introducing their amendments. I also thank all noble Lords who have spoken. I will speak to Amendments 223, 299, 302 and 303 in my name. I should probably say at this point that I am late to this party but, unlike the noble Lord, Lord Vaux, I am not a data protection specialist, I am afraid. However, I am a social security nerd, so I am here for this bit right now.

Since this is the first part of the Bill on DWP powers to tackle fraud, I need to add my little statement on the “fraud is bad” move. Fraud is a problem and has been getting worse across this Government. There have been scandals in procurement, of which the infamous PPE contracts are just one example. There is tax due that goes unpaid at scale and, in social security, the percentage of benefit expenditure lost to fraud has been rising under this Government. However, as my honourable friends made clear in the Commons, a Labour Government would take fraud seriously and pursue all those who seek to take money fraudulently or illegally from the state. They would also focus on helping people to avoid inadvertent overpayments rather than just waiting for them to make mistakes then coming down hard on them at that point. This should not need saying but, in some of the discussions on this Bill elsewhere, there has been a tendency to frame the debates rather along the lines of a classical fallacy: “Fraud is really bad. This will tackle fraud. Therefore, this must be really good”. I know that we are fortunate that in the Minister we have someone who is able to have a much more nuanced debate. I look forward to having exchanges in a way that recognises the important role of this House in scrutinising the powers that the Executive want to take unto themselves, which is exactly what Committees in the House of Lords do so well.

Scrutiny particularly matters here because, as the noble Lord, Lord Vaux, and my noble friend Lord Davies pointed out, all these amendments—more than 200 amendments, 38 new clauses and two new schedules—were introduced on Report in the Commons. My honourable friend Chris Bryant tried to recommit the Bill so that the Commons could discuss it, but the Government refused. The interesting thing is that in their anti-fraud plan back in May 2022, the Government announced that they planned to boost the DWP’s powers to get information from third parties when parliamentary time allowed. The noble Baroness, Lady Buscombe, made a fair point that departments have to wait for the right Bill to come along in order to use it, but the Government have known about this since 2022. They have had two years to draft the amendments, so although they might have had to wait for the Bill to come along, that does not seem a good enough reason for them to have waited until Report in the Commons to deposit them into the process. I hope the Minister will be able to explain the reasons for that.

My noble friend Lady Chakrabarti and others have asked some important questions about the scale on which these powers will be used; I am going to come back to that in our debate on the next group. It is hard to know the scale from the information we have so far, but DWP clearly does know, or has a sense of it, because paragraph 85 of the impact assessment states:

“Using our model to estimate volumes of hits for this measure, over the 10-year appraisal period, internal analysis has estimated that in total there will be an additional 74,000 prosecution cases, 2,500 custodial sentences and 23,000 applications for legal aid”.


It has modelled the volume of matching hits that would require investigation. Can the Minister tell the Committee what that number is? Also, what assurance can he give us that DWP has the resources to investigate that number of hits in a timely manner?

Paragraph 2 of new Schedule 3B says that the account information notices can only cover data going back a year and that they must be done in the week before they are given to DWP. Is there any time limit on how long DWP has to act on the results that have been handed over to it?

I turn now to the amendments in my name. Some of them are quite detailed because these powers are astonishingly wide and it is not at all clear how they could be used. I have deliberately tabled a series of amendments—in three groups in order to make sure that we have a chance to go into detail—to try to get information out of the Government and find out what this is about.

Amendment 223 is a minor probing amendment that would delete paragraph 3(1) of new Schedule 3B, which Schedule 11 to the Bill would insert into the 1992 Act. I will not rehearse it here but can the Minister explain what that provision is for and what its limits are? Neither I nor the people I have spoken to in financial services can understand why it is needed.

The noble Baroness, Lady Kidron, and others mentioned the fact that the Information Commissioner said he could not provide to Parliament his assurance that this measure is proportionate. My other amendments in this group are therefore designed to try to understand the impacts better. Amendment 302 would prevent these new powers coming into force automatically, while Amendment 303 would require the Secretary of State to fulfil several requirements before laying regulations to commence the powers. Amendment 299 is a minor consequential amendment. The effect of this is that the Secretary of State would have to issue a call for evidence, to inform the creation of the first code of practice, and consult relevant bodies. They would also have to lay before Parliament statements on key issues, of which I will highlight two.

The first would say whether and how AI will be used in exercising these powers, as well as how those proposals will take account of protected characteristics; this was touched on by my noble friend Lady Lister and others. That benefits often engage protected characteristics is in the nature of social security. Sickness and disability benefits engage disability, obviously; pensions engage age; benefits relating to children may engage age and also indirectly engage sex; and so on. The National Audit Office has warned that machine learning risks bias towards certain vulnerable groups and people with protected characteristics. So, what external governance or oversight is there to ensure that, once data are collected on the scale envisaged here, we do not end up with a mass breach of equality law?

The second issue I want to highlight concerns the provision that will be made to ensure that individuals subject to investigation do not experience hardship during it or lasting detriment afterwards. Given the comments of my noble friend Lady Lister about the cases from CPAG, can the Minister say whether a claimant’s benefits will be kept in payment while they are investigated following the data that are surfaced as a result of these trawls?

I am concerned that, given the potential scale of hits, a claimant who had, say, inadvertently breached the capital limit but then found themselves at the back of a long queue to be investigated could find themselves ending up paying back really large sums. The Minister will be aware of the recent media coverage, which others have mentioned, of how the DWP is treating people who were overpaid the carer’s allowance, a benefit that gives £81.90 a week to people providing at least 35 hours a week of unpaid care. It is a cliff-edge benefit—if your net earnings are under £150 a week, you get the lot; if they are over it, you get nothing—so a small rise in the minimum wage or a change in tax thresholds or rates can be enough to make someone entirely ineligible overnight, even if nothing changes in their circumstances.

As my noble friend Lady Lister said, apparently, DWP’s IT systems can flag when a carer’s income breaches the threshold but it does not necessarily do that, allowing them then to rack up potentially thousands of pounds’ worth of overpayments. The Guardian has investigated this issue; I shall mention two cases that it offered. First, an unpaid carer with a part-time charity job unknowingly breached the threshold by an average of £4.40 a week—£58 in total—caused by the automatic uprating of the national minimum wage. Because that left her not eligible for anything, she ended up being told to repay £1,715, including a civil penalty.

In the second example, a woman caring for her husband with dementia and Parkinson’s was told to repay nearly £4,000 for inadvertently exceeding the earnings threshold by calculating earnings from her zero-hours job on a monthly basis, as she thought the rules required, rather than a four-weekly basis, which they actually do; the rules around allowable costs and earnings are quite complicated. Crucially, according to the Guardian, she was told that, if she appealed, it could cost her even more. The Guardian quotes from a DWP letter telling her that, if she challenged the repayment order,

“the entire claim from the date it started will be looked at, which could potentially result in the overpayment increasing”.

Is that standard practice? Is DWP currently acting on all the alerts it receives of overpayments? If these powers are switched on, what safeguards will there be when that happens to protect millions of people from ending up paying back years of overpayments that DWP could have prevented?

Before embarking on investigations on this scale, we need to understand more about how this measure will work. We have had some excellent questions in Committee from the noble Lord, Lord Vaux, and others; I look forward to the Minister’s reply.

[The Parliamentary Under-Secretary of State, Department for Work and Pensions (Viscount Younger of Leckie) (Con)]

My Lords, I thank all those who have spoken today. I have been made well aware of the strong views expressed about this measure in Committee. I thank the noble Baroness, Lady Sherlock, for her kind remarks. She is right: I take all these matters extremely seriously. I have listened carefully to all the speeches, although I might not agree with them. Many questions have been asked. I will attempt to cover them all, of course; I doubt that I will be able to but I assure noble Lords that it is likely that a long letter will be required after this. Obviously, I will reflect on all the speeches made in Committee today.

I start by talking about the timing of the introduction of this measure. The noble Baroness, Lady Sherlock, said that the measure was introduced, in her words, “on the late side”. As she alluded to, the DWP published the Fraud Plan in May 2022, where it outlined a number of new powers that it would seek to secure when parliamentary time allowed. In answer to her question and others, in the parliamentary time available, the DWP has prioritised our key third-party data-gathering measure, which will help it tackle one of the largest causes of fraud and error in the welfare system. We will not sit back and ignore an opportunity to bring down these unacceptable losses and better protect taxpayers’ money. I will expand on all of that later in my remarks.

Before attending to the themes raised and addressing the amendments, it is important to set out the context for the power for which we are legislating. Fraud is a serious and damaging UK-wide issue, accounting for more than 40% of all crime. To be fair, many speeches alluded to that. The welfare system is also a target for fraudsters, and we are seeing increasingly sophisticated attacks occur on a scale that we have not seen in the past. We all have our own experiences at home of fraudsters who try completely different methods, not linked to the benefits system at all, to try to gain money through ill-gotten uses and methods.

In 2022-23, the DWP paid out more than £230 billion in benefits and payments to people across Great Britain. I very much took note of the figure that my noble friend Lady Buscombe raised. I say to the Committee that this figure is forecast to rise to nearly £300 billion by 2024-25, in quite short order, so this is a really serious issue to address. However, more than £8 billion has been overpaid in each of the past three years because of deliberate fraud against the state or because genuine errors have been made.

To assist the noble Baroness, Lady Lister, to whose speech I listened carefully, fraud, not error, is the biggest cause of welfare overpayments, totalling £6.4 billion of the £8.3 billion overpaid last year. The noble Lord, Lord Vaux, also asked about the figures. These losses are largely because people are intentionally and knowingly taking money that they are not entitled to. This is not organised fraud either; the vast majority comes from individuals who are not entitled to the money. We cannot underestimate the lengths to which some will go in order to take money they are not entitled to or promote ways to defraud us to a wider audience. This new legislation is not just about protecting the taxpayer; it will help those who make genuine mistakes in their claim, and our swift action will avoid them building up large overpayments.

Some people have said that the department has the powers that it needs to fight fraud and error—I think that was alluded to even today. However, some of the current powers that we have to ensure benefit correctness are over 20 years old—a point that I think my noble friend Lady Buscombe made. In this time, fraud has evolved and become increasingly sophisticated and we must keep pace with the fraudsters. It is for this reason that the Government are bringing these new third-party data powers, as set out, as said earlier, in the fraud plan.

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Moved by

[Baroness Sherlock]

220: Schedule 11, page 245, line 1, leave out from “only” to “relevant” in line 3 and insert “in cases where there are grounds to suspect that”
Member's explanatory statement
This amendment, alongside others to paragraph 1 of Schedule 11 in the name of Baroness Sherlock, would reframe the Secretary of State’s power to give account information notices, making clear that the power should only be used in cases where there is suspicion that benefits are not being paid in accordance with enactments and rules of law relating to those benefits.

[Baroness Sherlock (Lab)]

My Lords, I will also speak to the other amendments in my name, which are designed to dig further into exactly what the Government plan to do with these powers. Amendments 220 to 222 are probing amendments which seek to establish what would happen if the powers to give account information notices were used only where there is suspicion that benefits are not being paid as the law intends. I will try to use this to find out exactly what will happen with the signal that the noble Lord, Lord Clement-Jones, has been referring to.

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[Viscount Younger of Leckie (Con)]

My Lords, the debate on this group has focused largely on the amendments from the noble Baroness, Lady Sherlock, regarding using powers only where there is a suspicion of fraud, making provisions so that information collected can be used only for the narrow purpose of determining overpayment, removing pension-age benefits from the scope of the powers and requiring approval from Parliament before the power can be used on specific working-age benefits.

I was going to go over the reason behind these measures once again, but I will not delay the Committee on why we are bringing them forward. I believe I did that at some length in the previous group, so I am going to turn to the amendments raised.

Narrowing these powers as suggested by the noble Baroness, with Amendments 220, 221, 222 and 222A, will leave us exposed to those who are deliberately aiming to defraud the welfare system and undermine the policy intent of this measure. In fact, taken together, these amendments would render the power unworkable and ineffective.

To restrict the power to cases where DWP already has a suspicion of fraud, as suggested by the noble Baroness, would defeat the purpose of this measure. The intent is to enable us to use data from third parties to independently check that benefit eligibility rules are being complied with. We use data from other sources to do this already. For example, we use data from HMRC to verify earnings in UC and check that the benefit eligibility rules are being complied with. Parliament has determined that, to be eligible for a benefit, certain rules and requirements must be met, and the Government have a responsibility to ensure that taxpayers’ money is spent responsibly. Therefore, the DWP should be able to utilise information from third parties to discharge that duty. This is an appropriate and proportionate response to a significant fraud and error challenge.

The noble Baroness, Lady Sherlock, also proposed that the power should be restricted such that it would not apply to persons who hold an account into which a benefit is paid on behalf of someone who cannot manage their own financial affairs—such persons are referred to as “appointees”. An appointee is a person who may be appointed by the Secretary of State to act on behalf of the benefit customer. Usually, the appointee becomes legally responsible for acting on the customer’s behalf in all matters related to the claim. It is also made clear to the appointee, in the documents that they sign, that we may get information about them or the person they are acting for from other parties, or for any other purposes that the law allows, to check the information they provide.

Under our proposed legislation, it is right to say that there may be some people who are not themselves benefit claimants but who have given a person permission to pay benefits into their bank account, who may be picked up in the data returned by third parties. Under the noble Baroness’s amendment, we would not be able to gather data on appointees, which would make the power unworkable, because third parties would not be able to distinguish between an individual managing their own benefit and an appointee. It also assumes that no fraud or error can occur in these cases, which is definitely wrong. I assure the noble Baroness that we handle such cases regularly and have robust existing processes for identifying appointees on our own database and for carefully handling cases of this nature.

The noble Baroness would also like to see the power—

[Baroness Sherlock (Lab)]

Rather than asking all my questions at the end—I only have four—I will try to get answers as we go. On the appointees, I think that the Minister has just said that the reason the Government need these powers is that some appointees will have their benefit money paid into their own account, not into a separate second account, so that therefore needs to be the case. I am very happy to reword this amendment to make that clear. I was talking specifically about the linking arrangements; the amendment does not talk about excluding appointee accounts. It specifically says that accounts that are linked to an account into which the benefit is paid are not there. I am happy to reframe that in a way that defines it—I am sure we can find a way around this—but does the Minister accept the principle behind this: that, if there is a separate account that, say, I hold for a child who is there, this should not give a reason to look into my own accounts? Or is he saying that the Government want to look into my own accounts, or business accounts, or family accounts as well? Which is it?

[Viscount Younger of Leckie (Con)]

The Government do wish to have that power. I should make it clear that an appointee could be a claimant as well, so there is a dual issue. It is important that we retain that power, to be sure that we cover the whole ground. But I will reflect on the noble Baroness’s point.

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[Viscount Younger of Leckie (Con)]

That is understood. I know that I need to provide further reassurances. Attorneys are included for the reasons that I set out for appointees.

[Baroness Sherlock (Lab)]

My Lords, I thank the Minister for taking the time to try to answer the questions. I know that we have given him a hard time, but I thank him for responding so graciously.

He did not take the opportunity to explain the process simply to the Committee. It may be that it is too difficult to explain simply or that, in fact, he can explain what they intend to do, but the powers allow them to do something much wider than that. It would be helpful if he could reflect before he writes as to how best to frame this. I think I heard him trying to say to the Committee that people think that more information is being handed over than will in fact be handed over. If that is the case, it would be helpful if he could spell that out because that would at least begin to help people understand better what is going on.

Secondly, in responding to me, the Minister focused, understandably, on the content of the amendments. I was trying to explain that the reason they are probing is that it is quite hard to get a handle on this. It is a big, sprawly thing, and I am trying to find a way of nailing some jelly to the table; I am trying to find ways of containing it. I still do not know which benefits the Government can use the powers over and which ones they intend to. It is a great step forward to know where they are going to start; that is really helpful. I am also grateful for the clarity, whether people are happy or not, that the Government intend to use the powers on the state pension and make that clear because that was not the impression given in the House of Commons when the matter was debated there. That is a helpful piece of clarity for the Committee and the wider community.

I know this is hard; fraud is difficult. A case was mentioned where an organised fraud gang stole more than £50 million in social security benefits. I know it is hard, and I know it is hard for the DWP to understand precisely where these things will lead when you begin to go there. I understand that if it is too boxed in, it makes it difficult to be able to follow where the fraudsters go, who are often one step ahead of the Government. I get all of that, but there is a risk that when it has spread so widely, the level of concern gets to the point that it will not be as publicly acceptable as the Minister thinks it is. I ask him to take the opportunity, when he goes back to the department, to talk to colleagues and think about what kind of assurances the Government could try to find a way of giving to people, either staging processes or government oversight. I ask him to think about that because the kinds of concerns he has heard here will only increase as the powers start to unfold.

In the next group of amendments, which I think will now be discussed on Wednesday, I want to dig further into the question of who the data and account notice can be given to and what criteria will be used. That will be another chance to flush out some things, so I give notice now that I would like the Minister to look into those areas next. I am grateful for his efforts and to all Members of the Committee who have explored this matter. I beg leave to withdraw my amendment.

Amendment 220 withdrawn.