Public Authorities (Fraud, Error and Recovery) Bill

David Pinto-Duschinsky Excerpts

2nd reading
Monday 3rd February 2025 Commons Chamber

[Liz Kendall]

I will come on to that point in a moment, but I have the utmost respect for my hon. Friend. In fact, I think that the measures in the Bill will help us to spot such errors and prevent them from happening in the first place. People make genuine mistakes. We do not want them to build up errors and build up debt that they have to repay. I think that the Bill is part of solving that problem. I will say more about that in a moment.

I turn to fraud and error specifically in our welfare system. The Bill will modernise and extend the DWP’s anti-fraud powers, bringing it into line with other bodies such as His Majesty’s Revenue and Customs, so that we can use technology and data to find and prevent fraud more quickly and effectively; so that our serious and organised counter-fraud investigators have the powers they need to search premises and seize evidence, including from criminal gangs, and bring offenders to justice; and so that we can ensure that when people owe us money and, crucially, when they can pay, we get that money back for taxpayers. That all comes with strong and new safeguards and with independent oversight on the face of the Bill, as I will set out in detail.

[David Pinto-Duschinsky (Hendon) (Lab)]

As my right hon. Friend mentioned, the Conservatives did not do much on this issue except tagging on a Bill at the very end of their tenure. The Information Commissioner’s Office was very critical of the approach taken in that fraud Bill. Can she reassure the House that she has addressed those concerns?

[Liz Kendall]

I can indeed reassure the House. The Information Commissioner was rightly critical of the last measure introduced by the Conservatives—the third-party data measure. He has written to us today, and we will make sure that his letter is published. He says that he has reviewed our proposals and is very clear that the current measure more tightly scopes the type of information that can and cannot be shared; specifies much more clearly those in the power’s scope; requires a statutory code of practice before measures are taken; and includes a requirement for the Secretary of State to appoint an independent person to carry out reviews of these functions. I am more than happy to publish that and share it with the House, because I think it shows the changes this Government are making.

We are serious about getting these measures through. We understand people’s concerns, and we have addressed them. The Information Commissioner’s letter should reassure the House.

--- Later in debate ---

[David Pinto-Duschinsky (Hendon) (Lab)]

We have heard lots of statistics and detailed policy questions, but I want to start by sharing two stories. The first is of Antonia Foods in Wood Green, north London. From the outside, it looked like a normal neighbourhood corner shop selling fruit, veg and groceries, but from its back room Galina Nikolova and Gyunesh Ali ran a vast fraud operation, making use of transnational networks to file hundreds of illegal UC claims. By the time they were caught, they had defrauded the DWP of over £50 million. When the police finally raided their addresses, they found cases stuffed with cash. Nikolova and Ali received prison sentences, as did many of their associates, but the reality is that most of the money they claimed had long since disappeared, likely spirited out of the country. They had successfully stolen from us all.

The second story is of Yvonne, a disabled woman who was paid thousands of pounds more in benefits than she was entitled to over a number of years as a result of an innocent mistake and is now struggling to make ends meet as the DWP deducts overpayments from her current entitlement. Both those stories illustrate why we so desperately need the Bill.

The extent to which fraud against the public purse spread under the last Government is breathtaking. The proportions are simply staggering. As my right hon. Friend the Secretary of State said, public sector losses amounted to £55 billion last year—as much as the defence budget, and three times what we spend on police in England and Wales. That loss costs every man, woman and child £800 a year and is the equivalent of a third of the entire national VAT take.

This is not a victimless crime or some technical infringement. It robs every family in Britain, erodes our public services and takes money that could be used to help those most in need, depriving the most vulnerable of support. My constituents in Hendon and people across the country rightly expect it to be tackled. This is a crime that feeds on the most disadvantaged and weakens not only public services but the public’s faith in those services and their fairness. I say gently to those who have criticised the Bill that there is nothing progressive and nothing compassionate about allowing fraud to fester. It is a scourge that must be tackled. It is a scourge that grew out of control and was professionalised under the last Government.

Perhaps no area illustrates the challenge that we face, how it evolved and the last Government’s catastrophic failure to kerb fraud better than benefits. The DWP’s net bill for fraud and error, even after deducting underpayments, is £8.6 billion. That is £272 a second, £16,300 a minute and almost £1 million an hour. In the time that it will take for us to have the debate, the DWP will have lost more than £3 million. The bill for fraud and error is roughly the same as the Department’s entire programme budget. The DWP loses as much to fraud and error as it spends on every active programme it has to help the unemployed, the long term-sick, those with disabilities and the elderly. The picture is shocking, and it got much worse under the Conservative party.

The headline figures for fraud and error excluding underpayment tripled in cash terms between 2010 and 2024 from £3.3 billion to £9.7 billion. As bad as those figures are, they actually understate how badly things deteriorated under the Conservatives. Claimant error rose only slightly in cash terms, while official error remained flat. In contrast, fraud rose a stunning sevenfold in cash terms and more than fourfold as a proportion of the total benefits budget. That was not some act of God; it was the result of serial failures by the Conservatives, who failed to understand that fraud was evolving and failed to modernise the DWP’s powers to allow it to keep up in the arms race with the fraudsters. They also made truly terrible policy and design choices that actively fuelled the fraud crisis.

That can be seen nowhere better than in how the Conservatives set up universal credit. Because of their failures in properly establishing and policing its gateway, it became a magnet for fraud. Universal credit accounts for just 22% of benefit spending but contributes over 76% of all benefits fraud. Almost £1 in every £9 claimed through UC in the Conservatives’ last year in power was claimed fraudulently, compared with just £1 in £25 for housing benefit, £1 in £300 for PIP and just £1 in £1,000 for pensions.

The reality is that the Conservatives failed to take the threat of fraud seriously and failed to understand how it was being professionalised and industrialised, as my earlier story showed. They left us all to pick up the bill. They say that they acted, but the truth is they did nothing for years. Even when they finally got their act together at the end of their term in office, it was too little, too late. Once again, we are having to step in to clear up their mess. They owe everyone in the House and everyone in the country an apology. It is striking that in all their bluster during the debate, we have not heard the only word that they should be uttering: sorry.

Fraud exploded on the Conservatives’ watch because of their failings, but the pattern of fraud also tells us much about why the powers outlined in the Bill are so desperately needed. The DWP’s own statistics show that of the £7.4 billion lost to fraud last year, about £1 billion was lost to people who held too much capital to be eligible, £1.3 billion was lost to those who had failed to report their self-employment earnings, and a further £1.3 billion was lost to those who had failed to provide sufficient evidence. A further £250 million was lost to those who were abroad. Those frauds could have been caught with better data and better investigatory powers. It would have been possible for banks to spot people with too much capital to claim, or those with considerable earnings, yet today, because of the last Government’s failure to update their legislation, the DWP cannot compel information digitally.

Virtually all banking is now done online, and yet while fraud is propagated through digital channels and moving at lightning speed, the DWP is still forced to rely on analogue tools. In other fields, we already integrate information and get institutions to work together to prevent fraud. Banks regularly scan patterns that indicate fraud; benefits should be no different. We need digital tools and access to digital data to fight fraud. As with tax, investigators should have the powers they need to recover funds from those who are no longer on benefits. That is why the powers that the Secretary of State is proposing to take are so important as they will allow us to better identify those committing fraud and take more effective recovery action to get taxpayers’ money back.

That brings me back to my second story. Along with the measures that the Chancellor brought forward in the Budget, these measures will help us protect legitimate claimants by helping to pick up overpayments earlier. Last year, 480,000 people had deductions averaging £500 taken from their universal credit payments because of overpayments. Underpayments can be a source of huge anxiety and hardship. Preventing them and catching them earlier will help protect the most vulnerable claimants. That will be possible only because of the better data and the better processes that the Bill will help support.

As we heard from the hon. Member for Brecon, Radnor and Cwm Tawe (David Chadwick), some have voiced concerns about whether the powers proposed in the Bill will impinge on people’s rights. I am strongly reassured by the powerful raft of safeguards that the Secretary of State has included in the Bill. Those safeguards mean that new debt recovery powers will be focused not on those on benefits, but rather on those who are neither on benefits or PAYE, and the DWP will not have access to people’s bank accounts, contrary to what some have implied during the debate. Those safeguards will include independent oversight and options for appeal. I am pleased to hear that, on top of that, the ICO believes that the safeguards address the concerns that it had with the Conservative party’s proposals.

This is a fair and balanced package, which modernises our approach and gives us the digital tools to fight a digital scourge, and the enforcement powers to take on organised crime while protecting the vulnerable. This Government and this ministerial team are modernising our system to protect public money, help the vulnerable and, critically, get Britain working. I am proud to support the Bill.

Welfare Cap

David Pinto-Duschinsky Excerpts

Wednesday 29th January 2025 Commons Chamber

[Helen Whately (Faversham and Mid Kent) (Con)]

The welfare cap we are debating today was introduced back in 2014 by the Conservative Chancellor at the time, George Osborne, to hold the Government to account on the cost of our welfare system. Through the 2010s, in government, we broadly kept to that cap; it was part of the discipline we applied to the welfare system to make it fair for the taxpayer and to put into practice the strongly held Conservative principle that if you can work, you should work. We introduced universal credit to ensure that work always pays and supported businesses to create millions of jobs, and we helped thousands of people into work and drove down economic inactivity—and were opposed at every step of the way by the Labour party.

But in the years during and since the pandemic—I will not shy away from telling the truth—things changed. While the number of jobs kept going up, the number of people economically inactive also started to go up, and with that, the welfare bill, and that is a big problem. It is a financial problem that means we are today debating a welfare cap which has been breached. It is an economic problem because our economy needs the talents and energies of everyone. And it is a social problem: of the 9 million people of working age defined as economically inactive, 2.8 million are not working because of ill health. That includes growing numbers of young people. Young people are starting out on a life on benefits instead of starting out on a career, missing out on the opportunities that work brings—the sense of purpose, the connections with other people, the chance to learn and develop skills—missing out on the experience of being paid for their efforts, and missing out on the chance to build financial independence and security. We as a country have a moral and financial imperative to turn this around and in government we were working flat out to tackle it.

[David Pinto-Duschinsky (Hendon) (Lab)]

Will the hon. Lady acknowledge that under the last Conservative Government inactivity rates among the young were the highest in the OECD, and that they were working on it, but it was not working?

[Helen Whately]

As I am sure the hon. Gentleman heard, I was just acknowledging the fact that the economic inactivity rate started going up in the run-up to and particularly following the pandemic. We have a particular concern, which I am sure the Government share, around growing inactivity among young people. It is a challenge that we are experiencing more than other countries, and there is a lot of work to do to get to the bottom of it. I was involved in that work in government as a Health Minister, and it is imperative that the new Government get a grip on that issue.

--- Later in debate ---

[David Pinto-Duschinsky (Hendon) (Lab)]

I thank my hon. Friend the Minister for her opening speech, on a timely subject as the Government have just laid out their bold and striking ambitions to grow our economy and take the tough decisions needed, after years of dither and delay by the Conservative party. Today more than on other days, we have seen laid out in stark relief the choice before us of either doubling down on the failures—more of the same—or picking a new route. That is what this debate is about.

I want to talk about the root causes of some of the growth issues that we face. But first I want to focus on a number: £8.6 billion. That is how much the welfare cap was breached by, because of the Conservatives’ failures time and again. That is not a small amount. To put it in some context, it is as much as the entire programme budget of the Department for Work and Pensions. To give another comparison, it is half the entire police grant for all policing in England and Wales.

It is a phenomenal failure on the part of the Conservatives that we face this issue today, and it is not their only failure in the DWP. My hon. Friend the Minister laid out fantastically well the litany of failures. Let me pick up one in particular: the Conservatives breached the welfare cap, but we have not had much time to talk about their failures on fraud and error. Because of failures on their watch, the numbers more than doubled, and are now stuck at an elevated post-covid rate. They left us with an entrenched fraud and error problem.

We could go on. The litany of catastrophic mismanagement is almost endless. The hon. Member for Faversham and Mid Kent (Helen Whately) said that she could make savings. The Conservatives had 14 years —where were they? Instead, we got lots of “dog ate my homework” excuses. They should be hanging their heads in shame. As hon. Friends have pointed out, it is telling that, behind the shadow Minister, the Opposition Benches are empty. They know how badly they let the country down.

It is not just about the £8.6 billion; the Conservatives’ failures shine a spotlight on two deeper failures that are the root causes of today’s motions: a failure to grow the economy, and a failure to get people into work and to help those with health conditions move on in the labour market. Let me turn to growth first. We have heard a lot today about the economy, but it is worth pausing to remember how bad things were under the Conservatives. From 2019, on their watch, the economy grew slower than any other G7 economy, bar one. In the last decade of their rule, GDP rose in real terms by only 6%. If it had grown at the same rate as comparable countries, on average we would each be more than £8,000 better off.

I welcome the fact that after years of this country being held back by previous incompetent Governments, this Government are finally taking the decisions to realise our country’s potential. That is what we heard today: £78 billion being released through supporting the Ox-Cam arc; £160 billion through the Chancellor’s excellent announcements over the weekend to allow investment of pension surpluses; £7.9 billion of infrastructure to give us nine new reservoirs. The Conservatives had 14 years in government—do you know how many reservoirs they built, Madam Deputy Speaker? Zero. That is the difference.

I am proud of our Chancellor, who has made the tough decisions that have given us the foundation of stability and allowed us to make these announcements today. It is because of the stability created by the Budget and her other decisions that we now have inflation of 2.5%, that interest rates have been cut twice, because the Bank has confidence in the Government’s fiscal management, that investment is at a 19-year high, and that wages are growing at their fastest rate in three years—I could go on. It is only because of the tough decisions that we have made that we are in that position.

Beyond the Conservatives’ failure on growth, the breaches of the welfare cap also shine a spotlight on their terrible failure to get people into work and to combat poverty. The figures are extraordinarily stark; I thank my hon. Friend the Member for Loughborough (Dr Sandher) for sharing some of them. Today, one in five adults is economically inactive because of the Conservatives’ legacy. We are the only G7 country where employment rates remain below the pre-covid level. I note that the hon. Member for Faversham and Mid Kent, when asked, acknowledged the fact, but she could not tell us why that is. Well, I have a clue for her. It is because of the incompetence and the failures of her party.

What is more, we know that these problems are driven overwhelmingly by ill health, with 85% of those who have dropped out of the labour market having done so due to ill health. This disproportionately hits those over 50, but, scandalously, also affects the youngest in our society. The number of NEETs—those not in employment, education or training—went up by a third in the last three years of the previous Government.

It goes deeper than that. Beneath the shocking rise in 16 to 24-year-olds who are out of work and inactive, a stunning 79% are also low skilled, with skill levels lower than GCSEs. Because of Conservative failures, so many of our young people have been caught in a downward spiral of low skills, poor opportunity, low self-esteem and poor mental health.

This failure by the Conservatives is a moral disgrace, but it is also a massive economic problem. If not addressed, the sickness bill they bequeathed the country could exceed £100 billion by the end of this Parliament. I would like to say that this is the first time they Conservatives have done something like this, but that would not be true. Those of us old enough to remember will know that in 1997, the outgoing Conservative Government bequeathed more than 5.1 million inactive people to the incoming Labour Government. It is just what Conservative Governments do.

My hon. Friend the Minister also mentioned the fact that many of the technical changes the previous Government made to universal credit and other benefits actually dragged people further away from the labour market, putting up barriers and making it harder to get work. This is an absolute scandal, especially because we know that DWP staff—the people who work on this—want to make a difference. I worked for the new deal taskforce 26 years ago, working on the previous Labour Government’s strong efforts to get people back into work. I know that DWP staff want to make a difference, but, because of the previous Government’s terrible policy design and incompetence, they are often prevented from doing so.

This is a massive human tragedy. We know from survey work that at least half of the people who are inactive—4.5 million people—say that they want to work if they can have the right support. We also know that work is the best tonic for many of the issues faced by those who are inactive. We know from a University of Cambridge study, for instance, that just eight hours a week of paid work can reduce mental health issues in a large portion of the population by up to 30%.

What is more, the Conservative party did far too little to tackle the underlying dynamics of low work and no work faced by so many people in poverty. We know that the average family in poverty goes through up to seven separate spells in poverty. All too often, it is like “Hotel California”: they can check out, but they can never leave. Rather than trying to deal with that problem, all we got from the Conservative party were sticking plasters and political slogans.

I am incredibly proud to sit on the Labour Benches and support a Government who will take a different approach and are absolutely determined to make an actual difference and tackle the root causes. We heard from the Minister the action that will be taken to give our young people a choice, through the youth guarantee, between earning and learning—a real, proper stable start in life. We heard about the changes we will make to the DWP to actually get it working. We heard about the changes that will actually tackle the barriers to work—real, practical steps rather than the slogans of the Conservative party. We heard about the work on fraud and error, so that our public money is spent on helping people to get back to work, rather than leaking out of the system. We heard about the efforts that will be made to get people not just into jobs, but into good jobs.

It is worth pausing on that point for a second. The labour market has changed a lot in the past 30 years. It is no longer a given that all jobs provide a ladder to good, fulfilling, family-supporting work. For too long, the Conservative party, when it was in government, ignored that. It is such good news that through the good work laid out by the Minister on the industrial strategy, and through bringing the careers service together with Jobcentre Plus so that we have a system that focuses not just on getting people into work but on helping them get on, we finally have a Government who are taking the problem seriously.

Our ambition is no less than to give people proper power over their own lives. As my hon. Friend the Member for Loughborough pointed out, the Conservative Government so often just sought to demonise and sloganise. We are trying to put power back into people’s hands and give them the real power over their own lives that only fulfilling and decent work can offer.

As I said, I started work in the new deal taskforce in the DWP’s predecessor Department. I was lucky enough, later on, to work on similar issues in the Prime Minister’s strategy unit. What characterised the Administration then was a real passion to change lives and a real passion to make things better. That has been so lacking for the past 14 years, and it is so refreshing to hear that it is back. I am absolutely proud to stand here and support the motion.

“Get Britain Working” White Paper

David Pinto-Duschinsky Excerpts

Tuesday 26th November 2024 Commons Chamber

[Liz Kendall]

I understand the pressures that many businesses are under. The Budget tried to deal with a very difficult issue: if we are spending more than we are earning, our public finances are not working. Anyone who runs a business knows that they have to get the finances right, but many organisations recognise that they need to recruit more people with the skills that meet their particular concerns. They are worried about the increasing number of health conditions and people leaving work because of them. I am determined to work with and serve local businesses. I would be very happy to meet the hon. Gentleman to talk about the specific needs of businesses in his constituency.

[David Pinto-Duschinsky (Hendon) (Lab)]

I warmly welcome the White Paper. I think it is a huge step forward. Mental health challenges have been the biggest single driver of rising inactivity among the young, and we know that mental health can be hugely helped by work. One study shows that just eight hours of work a week will reduce the risk of depression and anxiety by up to 30%. Given that, what will the Secretary of State do to help support those at risk from mental health issues to get back to work?

[Liz Kendall]

I have talked about what we aim to do to prevent mental health problems from happening in the first place, with more mental health support in schools and in the community. I see this as a fundamental overhaul of the way the DWP and the NHS work together, so that support to get people with mental health problems into the right jobs becomes part of what the NHS does, by putting employment advisers into the NHS. The individual placement and support service, which began under the last Government through the NHS, has shown quite phenomenal results—40% of people are in work after five years. Their use of the health service—the number of relapses and days they spend in hospital—are also reduced. That is better for work and for mental health. This requires a big change in the way we work, but my right hon. Friend the Health Secretary and I are determined to make that happen.