Public Authorities (Fraud, Error and Recovery) Bill

Liz Kendall Excerpts

2nd reading
Monday 3rd February 2025 Commons Chamber

[The Secretary of State for Work and Pensions (Liz Kendall)]

I beg to move, That the Bill be now read a Second time.

This Bill will help deliver the biggest ever crackdown on fraud against the public purse, which has now reached an astonishing £55 billion a year. That includes fraud against our public services, such as by those who abuse the tax system; fraud by dishonest companies that use deception to win public contracts and manipulate invoices; and benefit fraud by criminal gangs and individuals, which now stands at a staggering £7.4 billion a year.

There have always been people who commit fraud against the state—tragically, this is not a new problem—but at a time when families across the country are working so hard to pay their bills and put food on the table, when more than 7 million people are stuck in pain and discomfort on NHS waiting lists, and when a shameful 4.3 million children in Britain are growing up poor, it is simply unforgiveable that the Conservatives allowed fraud to spiral out of control. During their 14 long years in government, they failed to put in place a proper plan to crack down on fraud, and there is no better symbol of this than their failure to update the powers of the Department for Work and Pensions to properly crack down on benefit fraud. Just let that sink in for a moment.

Over the last decade, fraudsters have become increasingly sophisticated in the techniques that they use to steal people’s money, using data, technology and all manner of scams. In response, banks and other companies have transformed their ability to spot and stop fraud, and to protect their customers’ money, but the last Government completely failed to do the same for taxpayers. In all their time in power, and with all the developments in technology and the ability to share data and information, they failed to update the DWP’s powers. The Conservatives will no doubt claim that they did introduce measures, but, in truth, they put forward one poorly thought-through measure that was tagged on to another Bill at the tail end of the last Parliament, without any of the proper safeguards or oversight in place. Today, all that changes with our new fraud Bill.

This Bill is tough and it is fair. It is tough on the large companies and dodgy businessmen who try to defraud our public services, it is tough on the criminal gangs and individuals who cheat the benefit system, and it is fair to claimants who make genuine mistakes, by helping us to spot and prevent errors earlier. Taxpayers deserve to know that every single pound of their hard-earned money is being spent wisely and that benefits are there only for those who need them, not fraudsters who take advantage.

[Richard Burgon (Leeds East) (Ind)]

The Secretary of State is absolutely correct to say that we need to pursue criminal gangs that are engaged in widespread organised theft. I put a written question to the Department for Work and Pensions to ask about the amount lost through personal independence payment fraud, and I was told that only 0.2% of such claims were fraudulent in 2022-23. Does the Secretary of State agree that as we pursue organised criminal gangs, it is really important that we make it clear that there cannot be a hostile approach to disabled people claiming PIP or disabled people more widely who are using the benefits system as they deserve to?

[Liz Kendall]

People who are genuinely entitled to claim benefits have nothing to worry about from this Bill, but we believe that the £7.4 billion wasted every year through benefit fraud must be cracked down on.

To the corrupt companies with their dodgy covid contracts, to the organised criminal gangs and to every single individual knowingly cheating the system, our message today is clear: we will find you, we will stop you and we will get our money back.

[Jim Shannon (Strangford) (DUP)]

No one denies that there are those who are blatantly cheating the system, as I referred to in my oral question to the Secretary of State earlier today. On her point about fair play, however, can she give an assurance to me and to the House? I am concerned that if officials in the Department seek out low-hanging fruit, people who have a genuine disability could be denied their rights. I am concerned about the anxiety, the depression and the physical effects that that might cause.

[Liz Kendall]

Actually, the Bill will do the precise opposite. Through the measures relating to the Public Sector Fraud Authority, we are saying to the large companies and corporations and to the individuals cheating, “We will treat you equally. We do not allow fraud against the public purse. We want to stop it and get our money back.”

[Several hon. Members rose—]

[Liz Kendall]

I will make a bit of progress.

I want to start by setting out the measures in the Bill that give the Public Sector Fraud Authority the powers that it needs—further to the point that the hon. Member for Strangford (Jim Shannon) rightly raised—to fight modern fraud across the public sector on behalf of Government Departments and public bodies.

[Ben Maguire (North Cornwall) (LD)]

Will the Secretary of State give way?

[Liz Kendall]

I will set this out first. The Bill will provide the authority with new powers to obtain search warrants, to enter premises and seize evidence as part of fraud investigations, to compel businesses and individuals to provide information where there is a suspicion of fraud, and to enable it to better detect and prevent payments made as a result of fraud or error. It will also bring in new debt recovery powers, so that we can get public money back for taxpayers, and new financial penalties that the PSFA can use as an alternative to often lengthy criminal prosecutions.

What happened during the pandemic was completely unacceptable, with billions of pounds squandered by the Conservatives on dodgy deals with their covid cronies. This Bill will help us to get that money back. It will double from six to 12 years the time limit for civil claims to be brought in alleged cases of covid fraud, giving the PSFA and our new covid counter-fraud commissioner more time to investigate complex cases relating to those who exploited a national emergency for personal profit.

[Dame Meg Hillier (Hackney South and Shoreditch) (Lab/Co-op)]

I have spent more than a decade studying fraud and error in the DWP. The Secretary of State is right that levels of fraud have been intransigently high, but my concern is about where there are errors. Quite often, they are made by the Department. My constituent received a £5,000 overpayment. Will the Secretary of State make it clear to the House that people in that situation will not have money taken out of their bank account, and that they will be treated properly if there is a small error on their side or a big error by the Department?

[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.

[Andy McDonald (Middlesbrough and Thornaby East) (Lab)]

My right hon. Friend has the House’s wholehearted support in pursuing the recovery of funds taken by fraud and error. The National Audit Office estimates that, in the last financial year, £39 billion of tax revenue was not received due to fraud and error, compared with £7 billion in overpaid benefits classed as fraud, which we want to pursue. Can she reassure the House that an appropriate level of resources will be targeted at recovering this large sum of money, which will bring better dividends back to the Treasury?

[Liz Kendall]

My hon. Friend is right to raise this issue, which he knows the Chancellor and the Treasury team are looking at seriously. The clear message from this Government is, “If you are getting money to which you are not entitled or owe money to the taxpayer through either unpaid taxes or fraud, that is wrong.” We treat everything the same, large or small. We believe in our public services and our social security system, and we want people to know that every single penny of their money is wisely spent and goes to those in the greatest need.

[Rachel Gilmour (Tiverton and Minehead) (LD)]

As a Member of the party that introduced the state pension, I am behind the Government on this Bill because we all want to cut down on tax fraud and evasion. But I am concerned that pensioners are included under this blanket of Government scrutiny, and it seems that the only thing they have done to deserve it is to get a bit old.

[Liz Kendall]

One of the new measures introduced by the Bill, the eligibility verification measure, explicitly excludes the state pension. I reassure the hon. Lady on that point.

[Shaun Davies (Telford) (Lab)]

In places like Telford, it is a basic principle that people pay into the system and then take out of the system, or their neighbours do, when they are in need. The companies and individuals that are defrauding national benefits are often also defrauding local authority benefits and schemes. Will we extend these powers so that local government is able to work with national Government to pursue this fraud?

[Liz Kendall]

I reassure my hon. Friend that local authorities will be able to put examples to the Public Sector Fraud Authority for scrutiny. The new powers introduced by the Bill will enable the PSFA to crack down on precisely those issues.

[Ben Maguire]

Will the Minister give way?

[Liz Kendall]

I will crack on a little, and then I will be happy to take an intervention.

I will now spell out each of the Bill’s measures in turn. First, there are powers to investigate potential fraud. The Bill will mean that, for the first time, the DWP’s serious and organised crime investigators will be able to apply to a court for a warrant to enter and search the premises of suspected fraudsters and criminal gangs to seize items for evidence, such as computers and phones. At the moment, our investigators have to rely on the police to do this. The Bill will enable us to act much more quickly to gather evidence, to take control of and speed up investigations, while also freeing up police time. These powers will be used only when approved by the courts, and the police will continue to be responsible for arresting suspects.

Secondly, the Bill will update the DWP’s information-gathering powers for investigating fraud. At the moment, we have the power to require information from only a limited list of third parties. This does not include key organisations and sectors that could help to prove or disprove suspected fraud, such as airlines.

To add to that, there is limited ability to require responses to requests to be sent electronically. Instead, quite unbelievably, they have to be sent in writing or physically collected, which is time consuming and cumbersome, to say the least. That limitation on our powers completely underlines how the changes in the Bill are long overdue, and the lack of action by the previous Government. The Bill widens who the DWP can compel information from, and it will enable us to require the information to be provided digitally by default.

Thirdly, our new eligibility verification measure will enable us to require banks or other financial institutions to provide crucial data to help identify incorrect benefit payments people might be getting, including fraudulently, such as if someone has too much in savings, making them ineligible for a benefit, or if they are fraudulently claiming benefits abroad when they should be living in the UK. People should not be getting benefits they are not entitled to, and the alerts will make the process of identifying potential fraudsters much simpler, quicker and easier.

However, we know that people lead busy lives and sometimes genuine mistakes happen. The measure will help there too, by finding and putting errors right quickly, preventing people from building up large debts that they then need to repay. I am absolutely determined to reduce benefit mistakes by stopping them from happening in the first place and to avoid debts building up, with all the worry and distress that causes. That is why I have launched the independent investigation into the overpayment of carer’s allowance, in order to learn lessons about what went wrong and ensure that does not happen again.

I want to stress to the House that, under our eligibility verification measure, the DWP will not be able to access people’s bank accounts or look at what they are spending. We will not share any personal information with banks. Once an alert has been issued, any final decision about someone’s benefits will always be taken by a human being and the state pension will be excluded from the measure. There will also be independent oversight of the power on the face of the Bill, with the requirement to produce reports and lay them before Parliament, which I will say more about in a moment.

[Sammy Wilson (East Antrim) (DUP)]

The Minister is outlining the actions she intends to take to ensure that errors do not happen and that humans will conduct any reviews. However, once a decision has been made—whether the error was genuine or not, the person should not have received the money—the Bill sets out that the person is still subject to all the measures that would be imposed on people who have deliberately engaged in fraud. That is the real worry. Despite the Secretary of State’s assurances, errors will still be made. Judgments will have to be made about whether the money, given in error, is recoverable, and if it is recoverable, it will be treated as if that were fraud.

[Liz Kendall]

No, it will not be treated in the same way. There is much more we can do to use technology to prevent genuine mistakes and errors building up in the first place, but we also have to use all the technology and information-sharing abilities we have to crack down on fraudsters who will use anything they can to try to defraud the system. I will come to the wider safeguards in the Bill towards the end of my speech, but my hon. Friend the Minister for Transformation and I will be more than happy to talk to the right hon. Gentleman in more detail about any other concerns he may have.

[Ben Maguire]

On that point, will the Secretary of State give way?

[Liz Kendall]

I will; I did promise to do so.

[Ben Maguire]

I am interested to hear about the measures in the Bill relating to local authorities and public authorities. Has the Secretary of State considered expanding remit of the Public Sector Fraud Authority to investigate cases of serious mismanagement of funds by local authorities, such as the recent botched sale of Newquay airport by Conservative-controlled Cornwall council, which reportedly cost Cornish taxpayers over £1 million in consultancy fees and the like?

[Liz Kendall]

The hon. Gentleman has made his point simply and clearly. The Bill is about tackling fraud and people who have defrauded the public purse. I am sure his local newspaper will write his comments up very clearly.

The fourth chapter of part 2 of the Bill is about widening our ability to punish fraudsters using a financial penalty as an alternative to seeking prosecutions. At the moment, we can issue financial penalties only in cases of benefit fraud. The Bill extends our ability to use them in cases of fraud against any type of DWP payment—for example, if we had any future scheme like the kickstart employment scheme. That will ensure that more fraudsters committing a wider range of fraud can be dealt with swiftly without going to court.

Last but not least, the Bill gives the DWP more power to get back public money that someone owes in cases where they can repay it but repeatedly refuse to do so. This power does not cover people on benefits or in payrolled employment, because money can already be recovered through the social security or pay-as-you-earn systems, but for people who have moved off benefits and are not on PAYE—for example, because they are self-employed or now living off savings—the Bill will enable the DWP to request the bank statements of people we know owe us money but who have repeatedly refused to engage with us, to verify that they have sufficient funds to repay. We can then recover the money from their bank account through either a one-off lump sum or regular deductions. That will be done in a fair and manageable way, with time for the person to make any representations and the right to appeal.

As a last resort, if someone owes us more than £1,000 and continues to repeatedly refuse to engage with us and agree how they will pay the money back, we can go to court and get an order to disqualify that person from driving for up to two years. This is the same power that the Child Maintenance Service has been able to use for the last 25 years in cases where a parent repeatedly refuses to make payments to support their child. In considering a disqualification order, a court will always check whether the person needs a driving licence for work, because taking it away would be totally counterproductive if they do, and look at other reasons why a license may be essential, such as if the person is disabled or a carer. The measure is for people who have repeatedly refused to engage with the system. It is an important power that the DWP should have to bring people to the table for a discussion about how they will repay the money that they owe. We are clear that someone keeping public money to which they are not entitled is serious, and will result in serious consequences.

[Ben Lake (Ceredigion Preseli) (PC)]

I am grateful to the Secretary of State for outlining some of the Government’s thinking behind clause 91. Will she elaborate on whether the Government have considered the fact that such a disqualification would have a disproportionate impact on somebody living in a remote area, compared with those in more urban areas, where there is much greater access to public transport?

[Liz Kendall]

As I said, the court will always look at whether the person needs a car for their job, but we cannot say that people are allowed to get away with fraud in different parts of the country. This is about getting money back. The measure is for people who have repeatedly refused to engage with us, and who we know have the money to repay what they owe. We can bring them to the table and have a discussion about that repayment. I think that most members of the public would think that that is totally reasonable and fair, and that is the new power that we will have.

Let me turn to the strong new safeguarding measures in the Bill. First, as I have said, there will be independent oversight in the Bill for the eligibility verification measure, and new powers for the DWP and the Public Sector Fraud Authority to investigate fraud. I will appoint an independent person to oversee how the EVM is being used and its effectiveness. The Parliamentary Secretary, Cabinet Office, my hon. Friend the Member for Queen’s Park and Maida Vale (Georgia Gould), will also appoint an independent person to review the use of the PSFA measures. Both will be required to provide reports to the Government, which will be published and laid before Parliament. His Majesty’s Inspectorate of Constabulary and Fire & Rescue Services will oversee the investigation powers of the DWP and the Public Sector Fraud Authority. Any complaints about the use of the new search and seizure powers in the Bill will be referred to the Independent Office for Police Conduct.

[Kirsty Blackman (Aberdeen North) (SNP)]

This is a genuine question on the power to request information: will the DWP be able to request information from charitable organisations that are perhaps providing support to people, or from Members of Parliament, who may be providing support to constituents who come through our door?

[Liz Kendall]

The eligibility verification measure is for banks and financial institutions. It has been tightly defined, which is one of the reasons the Information Commissioner has written his response now. The last Conservative Government just referred to third-party data. That was not a serious proposal, narrowly defined with proper independent oversight. We want the legislation to pass and be used proportionately and effectively. That is why we have included the proposals as drafted.

The second important point is that there will be a statutory code of practice on how the powers can be applied, which we will consult on during the passage of the Bill, to clearly define the scope and limitations. Thirdly, there will always be vulnerability checks for each individual under the new debt recovery powers to ensure that people are not forced to pay back money that they cannot afford. Last, but by no means least, final decisions affecting benefit entitlement will always be made by a human being. Those decisions will sit alongside the right to reviews and appeals—no ifs, no buts. Put together, I believe that those new safeguards will provide the reassurance that the public and some Members of this House need that the Bill’s powers are proportionate, safe and fair.

The Bill delivers the biggest upgrade to the DWP’s anti-fraud powers in more than 14 years. It brings in new powers to tackle fraud right across the public sector by empowering the Public Sector Fraud Authority, and not before time. Our approach is tough but fair: tough on criminals who cheat the system and steal from taxpayers; tough on people who refuse to pay back money; fair on claimants, by spotting and stopping errors earlier, helping to avoid people getting into debt; fair on those who play by the rules and rely on the social security system; and fair on taxpayers, by ensuring that every pound is spent wisely, responsibly and effectively on those who need it. We were elected on a mandate for change, and that is what the Bill will deliver.

[Madam Deputy Speaker (Caroline Nokes)]

I call the shadow Secretary of State.