Public Authorities (Fraud, Error and Recovery) Bill

Lord Palmer of Childs Hill Excerpts

2nd reading
Thursday 15th May 2025 Lords Chamber

[Lord Palmer of Childs Hill (LD)]

My Lords, I congratulate the noble Baroness, Lady Spielman, on her maiden speech, and we welcome her to the House.

I rise as a Liberal Democrat to speak in firm opposition to the Public Authorities (Fraud, Error and Recovery) Bill. While we all share a goal of preventing fraud and ensuring the integrity of public funds, the Bill, under the guise of fraud prevention, risks entrenching mistrust, undermining civil liberties and further marginalising our most vulnerable citizens. The Minister said that the Bill seeks to challenge the fraud that lines the pockets of criminals—but it goes well beyond that. This legislation should concern anyone who values fairness, proportionality and compassion. My noble friend Lady Kramer spoke about whistleblowing, and I trust that the Minister will also focus on that in her reply.

I turn to those in receipt of carer’s allowance. Many of us in this House will have heard the harrowing stories of carers, often quietly heroic individuals, who face harsh penalties for minor and often unintentional administrative errors. They are not fraudsters; they are parents caring for disabled children, spouses supporting terminally ill partners or elderly people looking after loved ones with dementia. The reality is that carer’s allowance rules are notoriously complex: just a few extra hours of work or a slight rise in income can lead to an overpayment, which many do not even realise until months later, when they receive a demand to pay thousands of pounds.

Under the Bill, such individuals would face expanded surveillance, automatic bank deductions and potentially public shaming, all without clear distinctions being made between honest mistakes and intentional fraud. This is not justice—this is cruelty wrapped in bureaucracy. The Bill proposes sweeping powers to access banking data, as many noble Lords have suggested. Let us be clear: these are bank spying powers that would allow the Department for Work and Pensions to trawl through the bank records of millions of people, not because they are suspected of a crime but because they receive support they are legally entitled to. At a briefing with the Minister, I raised that in this Bill there is no mention of things that all accountants know about, such as the garnishing of bank accounts, which already exist for the collection of debts.

The powers constitute a fundamental assault on the right to privacy. They normalise mass surveillance of the poor, while doing nothing to address the significantly larger issue of tax fraud, which costs the Treasury nearly six times more than benefit fraud but receives a fraction of this attention. The noble Lord, Lord Sikka, referred to this. The problem is that the fine line between tax avoidance and tax evasion is sometimes a grey line. It is also how HMRC and its predecessor, Inland Revenue, tackle the problem when they find that someone has evaded tax. It is generally done by a financial penalty. I am reminded of the anecdotal story of the person told of the financial penalty for his unaffordable error who said, “Could I pay in cash?”.

Where is the proportionality that the noble Lord, Lord Vaux, pointed out earlier in this debate? As the right reverend Prelate said, affordability assessments are needed. Furthermore, the Bill dangerously conflates fraud with error. According to the DWP’s statistics, fraud accounts for just 2.8% of benefits expenditure, yet the narrative pushed by this legislation implies widespread deceit among claimants. In truth, many overpayments arise from the bewildering complexity of the system or administrative mistakes by the DWP itself, mistakes which cost the public £800 million last year. Is it right that someone with a disability who disclosed all their financial details in good faith can be told months later that they owe thousands due to a departmental oversight? Is it right that a carer on the brink of burnout is treated as a criminal because of a minor miscalculation?

One case shared by Turn2us was that of a woman in her 60s, housebound with several disabilities and complex mental health needs. After disclosing her private pension when applying for universal credit, she was told she had been overpaid and faced monthly deductions, even from her personal independence payment and non-means-tested benefit. Her crime was being honest in a broken system. Her punishment was perpetual financial stress and a complete loss of trust in the very institution meant to support her.

I understand the purpose of the Bill, but it is focused on those who can least afford it, and very often, those who can afford it are still going to get away with cheating the system. The Bill does not fix that system; it weaponises it.

Public Authorities (Fraud, Error and Recovery) Bill

Lord Palmer of Childs Hill Excerpts

Committee stage
Wednesday 25th June 2025 Grand Committee

[Baroness Finn (Con)]

My Lords, many congratulations to the noble Viscount on the birth of his granddaughter.

Amendment 122D, in my name and that of my noble friend Lord Younger, touches on a principle that we have returned to time and again during Committee: that those institutions asked to play a role in the delivery of public policy must be treated not as passive instruments but as valued and active partners.

Clause 95, as currently drafted, enables the Secretary of State to recover costs from those individuals committing wrongdoing or fraud that the Secretary of State “reasonably incurs” in the exercise of the powers set out in this legislation. That is both logical and fair. However, what it does not do, and what our amendment seeks to rectify, is recognise that banks, too, will incur costs in the process of complying with the obligations imposed by this Bill. Those obligations are not trivial. Banks will be expected to carry out eligibility checks, respond to requests for information and facilitate direct deduction orders. These are significant operational functions, requiring staff time, system changes and compliance resources. The financial and logistical burden on institutions, particularly smaller and mid-tier banks, should not be underestimated.

We have heard repeatedly throughout Committee that the effective functioning of this legislation depends on strong co-operation between government and the financial sector. If that is true—we believe that it is, notably from what we have heard from the Government so far on the test and learn exercises—we must be honest about the responsibilities that we are placing on banks and we must be clear that those responsibilities come with real-world costs.

We understand that this arrangement between the DWP and the banks is new and, as such, it is unclear how many cases there may be to deal with. It may be a huge number, or it may end up being fairly minimal. Of course, we hope for the latter. More likely, this is an exercise of checking and counter-checking between the banks and the DWP in order to ascertain clarity of wrongdoing or not. It therefore begs the question of resources and costs. Can the Minister give us some estimates of the likely number of cases involved? Who will pay for the costs of managing these cases? If it is the banks, what discussions, if any, have taken place on the amounts? Is there an understanding of what happens if the costs become too great a burden on the banking sector? Is there some agreement that, if costs exceed a certain amount, the DWP—ie the taxpayer—will pay the excess?

We do not think that it is good enough to say that banks must comply. We must also ask how they can comply and what support or protections the Government are willing to offer them in return. Amendment 122D would provide a simple but important clarification: that banks, as defined in this Bill, are entitled to recover the costs that they incur as part of fulfilling their legal obligations. This is not about profit; it is about fairness, sustainability, and operational feasibility.

Let us not forget that we are asking private institutions to assist in the delivery of public sector enforcement mechanisms. That is a departure from many traditional roles and it is only right that we recognise the cost implications of that shift. We would not expect public bodies to take on additional responsibilities without due consideration of the costs involved, nor should we expect that of banks. They are not merely pipelines through which government powers are to be channelled. They are regulated institutions, fundamental to our economy, whose engagement in this regime must be underpinned by a mutual understanding of expectations, limits and recompense.

We have rightly asked for high standards of data protection, compliance and verification. We have spoken about building confidence in the system and ensuring proportionality in the exercise of power. That confidence must also apply to those partners on whom the success of the Bill relies. If we expect efficiency, we must also provide clarity, including clarity about the financial impact of compliance.

The other significant and important point to raise here is the impact of opportunity costs. We know that the banks will dedicate staff, time and resources to undertake these tasks, which will prevent them from undertaking core duties that would otherwise make them money. We cannot just focus on operational costs; we need to focus on the benefits that banks will miss out on as a result of complying with the Bill. Can the Minister therefore set out to the Committee how the Government will calculate the opportunity cost? Can she confirm that these costs will be determined in partnership with banks and where the money for the reimbursement of these opportunity costs will come from?

In the spirit of pragmatism and partnership, I urge the Minister to consider how the principles of our amendment could be taken forward. It seeks a small change to the text but would be an important signal to those we rely on to help deliver the objectives of the Bill that they will be supported, not simply directed. We all want to see this legislation succeed; we have made that point many times. For that to happen, those on whom it places demands must have confidence that they are part of a fair, transparent and properly resourced framework. Amendment 122D would help us move one step closer to that goal. I beg to move.

[Lord Palmer of Childs Hill (LD)]

My Lords, Amendment 122D, tabled by the noble Viscount, Lord Younger of Leckie, and moved and spoken to so fully by the noble Baroness, Lady Finn, would permit banks to recover the costs that they incur, as defined in the Bill. The principle behind the amendment is to recognise that, while banks play an essential role in supporting public authorities to identify and recover funds lost through fraud or error, the operational and administrative demands placed on them can be significant. Allowing banks to recover reasonable costs would ensure that the burden of implementing these public service functions does not fall unfairly on private institutions and would support a collaborative approach between the Government and the financial sector.

However, it is important to ensure that any cost-recovery mechanism is transparent, proportionate—how often we keep using that word—and subject to appropriate oversight. Questions remain about how the “reasonable costs” mentioned in the Explanatory Notes for Clause 95 will be defined, who will determine the quantum that can be recovered and what safeguards will be in place to protect individuals from excessive fees. There must be a clear framework to prevent costs from undermining the overall financial benefit to the taxpayer or placing undue hardship on those subject to deduction orders.

As the Bill progresses, it will be vital to clarify these details—I hope the Minister will help do that—ideally through the code of practice and ongoing consultations with stakeholders to maintain fairness, accountability and public confidence in the system. I await the Minister’s response, to fill the gaps that the noble Baroness, Lady Finn, and I have outlined, particularly what “reasonable costs” is meant to mean.

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

My Lords, I thank the noble Baroness, Lady Finn, for introducing Amendment 122D and the noble Lord, Lord Palmer, for his contribution. It is worth saying at the outset that the noble Baroness’s comments ran quite wide, encompassing some of the broader issues that we discussed in previous debates on the Bill.

New Section 80F, inserted by Clause 95, allows any reasonable costs incurred by DWP in recovering debt to be added to the total debt owed, and therefore for them to be collected through any means of recovery available to DWP. As drafted, the amendment would permit the Secretary of State, but not the bank, to recover any costs incurred by the bank as though it were part of the debt owed to DWP through methods of recovery such as deductions from benefit, et cetera, but without any requirement to pass any money recovered to the bank. I realise how hard it is to draft amendments in opposition—I have been there—so I believe it is possible that the intention of the amendment was to allow a bank only to recover any cost it had incurred when complying with its obligation under Schedule 5, so I shall address the amendment on the assumption that was the intention.

Officials have engaged extensively with key representatives from the finance sector, including UK Finance, and we are seeking to work collaboratively to ensure that the legislation enables banks reasonably to meet their legislative obligations without causing problematic burdens for them or unintended consequences for individuals. Indeed, changes have already been made to the Bill based on that engagement and feedback.

I agree that banks should be able to recover administrative costs associated with implementing a direct deduction order on behalf of DWP. These costs should be reasonable, providing some protection to debtors and consistent with existing legislation. In line with existing Child Maintenance Service recovery regulations, therefore, DWP will set the maximum limits for costs associated with implementing regular and lump sum deduction orders that banks can recover. Paragraph 24 of Schedule 5 further requires DWP to consult persons who represent the interests of the bank and any other appropriate persons in making the regulations.

On safeguards, banks are able to deduct any reasonable costs they incur when complying with a direct deduction order. In practice, that prevents a bank charging the debtor more than its costs. Paragraph 24 of Schedule 5 allows us to make provision about the administrative charges that can be imposed by banks. That power will be used to introduce a cap on the charges that can be imposed under this clause that can be adjusted in line with inflation to ensure that the charges remain reasonable at all times. I think we made that clear.

The code of practice spells out specifically what we will do in this area. I assure the noble Lord that we are discussing with the banks what is reasonable. This works in other areas. The code of practice says that banks may deduct any reasonable costs and that the costs that they can deduct will be limited by legislation and taken into consideration when the terms of the deduction order are done, to ensure that it remains affordable. I hope that, with those reassurances, the noble Baroness will feel able to withdraw her amendment.

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[Lord Palmer of Childs Hill (LD)]

My Lords, I support Amendment 123, tabled by the noble Baroness, Lady Lister of Burtersett, and others, which would bring the test for recovery of universal credit overpayments caused by official error into line with Regulation 100(2) of the Housing Benefit Regulations 2006.

At present, the Department for Work and Pensions is empowered to recover universal credit overpayments even when they result from its own mistakes—a policy introduced with the Welfare Reform Act 2012. This approach marks a significant departure from the previous position on legacy benefits, where overpayments arising from official error could be recovered only if the claimant could reasonably have been expected to realise that there was an overpayment. The current system places an unfair burden on claimants, many of whom have no way of knowing that an error has occurred yet are still liable for repayment. I am grateful for the legal expertise of the noble Lord, Lord Verdirame, on this, showing that it is a complicated matter, with many legal precedents that I trust the Minister will take into account.

The evidence we have shows that the recovery of official-error overpayments can have severe financial and psychological impacts, with some individuals facing destitution as a result of sudden deductions from their benefits. The amendment would restore a vital safeguard by ensuring that only those overpayments that a claimant could reasonably have been expected to notice are recoverable, aligning universal credit with the principles of fairness and justice that underlie our social security system. This change would not prevent the recovery of overpayments where there has been claimant error or fraud but would, I hope, protect honest claimants from being penalised for mistakes entirely out of their control.

Many people do not look too closely at the moneys that come into their bank or Post Office account. They receive it and they think it is what they should receive. Sometimes it is not enough and sometimes, as we are discussing here, it might be too much. But most people take it and use it. We used to have this problem with council house rents, where the benefits were paid to the householder and they sometimes had to make a choice: did they buy bread and food or pay the rent? They used it for bread and food and did not have the money for rent. The rents started to be paid direct to the local authority or housing association, in order to mitigate that. It tends to prove the fact that people do not notice: they take what is needed and receive it. I urge noble Lords to support this amendment, to ensure that the system is both compassionate and just. I commend it to the Committee.

[Viscount Younger of Leckie (Con)]

My Lords, in speaking for the first time today, I take this opportunity to offer my congratulations to the Deputy Chairman of Committees, the noble Viscount, Lord Stansgate, on the arrival of his grandchild; I think he had indicated that he or she had arrived. It is interesting to reflect that when we started off on day one of Committee there was either a wedding or a honeymoon or both— I forget—and this allows me to declare a small interest of my own, which is that my daughter is due to give birth in two weeks.

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Moved by

[Lord Palmer of Childs Hill]

124: After Clause 96, insert the following new Clause—
“Recovery of overpayments of Carer’s AllowanceThe Secretary of State may not exercise any of the powers of recovery under this Act in relation to a person who has received an overpayment of Carer’s Allowance until such time as—(a) the Secretary of State has commissioned an independent review of the overpayment of Carer's Allowance;(b) the review has concluded its inquiry and submitted a report containing recommendations to the Secretary of State;(c) the Secretary of State has laid the report of the independent review before Parliament;(d) the Secretary of State has implemented the recommendations of the independent review.”Member’s explanatory statement
This new clause would delay any payments being taken from people who the Government may think owe repayments on Carer’s Allowance until the independent review into Carer’s Allowance overpayments has been published and fully implemented.

[Lord Palmer of Childs Hill (LD)]

My congratulations to everybody. I shall speak also to Amendment 127 in my name. These amendments seek to delay any payments being taken from carers whom the Government believe owe repayments on carer’s allowance, something I have spoken about a lot during this Committee, until the independent review into carer’s allowance overpayments has been published and, crucially, fully implemented. It is a matter of justice and basic fairness that we do not penalise carers, who are the unsung heroes who support our most vulnerable, while the very system that created those overpayments is under independent scrutiny.

We know from recent figures that at least £357 million has been overpaid since 2019, with many carers accruing large debts that they were not aware of through no fault of their own, often because the Department for Work and Pensions failed to act swiftly on overpayment alerts or to communicate effectively with carers about their obligations. The independent review, commissioned by the Secretary of State and led by Liz Sayce, is tasked with uncovering how those overpayments occurred, how to support those affected and how to prevent such distressing situations in the future. Until we have the benefit of its findings and recommendations, it would be unconscionable to proceed with debt recovery that would push already struggling carers into future hardship.

Furthermore, Amendment 127 proposes that the implementation of what will then be the Act be delayed until the review’s findings are published and acted upon. This is a call not for indefinite inaction but for responsible and evidence-based law-making. The Government’s decision to commission this review is a recognition of the serious flaws in the current system, whether it is just one payment or a mass of payments, as we discussed on the previous amendment, and the real harm caused to carers, many of whom breached the earnings limit by only a small amount yet face life-changing debts. To proceed with the Act before we have learned the lessons from this debacle risks repeating the same mistakes and undermining public trust. We owe it to carers and to the integrity of our social security system to ensure that legislative changes are informed by a full understanding of the problem and a clear plan for preventing its recurrence. Let us show carers the respect they deserve by pausing, listening and acting on the independent review before we ask them to pay a penny more. I beg to move.

[Baroness Bennett of Manor Castle (GP)]

My Lords, I rise extremely briefly and apologise to the noble Baroness, Lady Lister, that I could not be in the previous group as I was in the Chamber. I will take seconds to intervene in the interesting debate between the noble Baroness and the noble Viscount to say that, of course, if you have a universal basic income, that is an extremely simple system to administer that would not create any of these kinds of problems.

Anyway, I rise with great pleasure to follow the noble Lord, Lord Palmer of Childs Hill, and to back in particular Amendment 124, although I will be interested to hear the Minister’s response to Amendment 127. I felt I had to speak because I raised at some length in earlier discussions the case of Nicola Green. That is one case, but overall the Government have been clawing back £357 million. Hundreds of people have acquired criminal records in what I think most people would agree are entirely unjust circumstances, whatever the detail of the law. Some people now face debts of up to £20,000 or more.

This amendment—waiting until we have the review and not doing more damage to individuals’ lives and to the reputations of the Government and the Department for Work and Pensions—is a really simple, practical measure, and I commend the noble Lord, Lord Palmer, for doing this and for powerfully presenting his case. I also align myself very much with his tributes to unpaid family carers, who are doing so much in our society for what are, on a week-to-week basis, derisory sums of money for an incredible amount of labour.

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[Baroness Sherlock (Lab)]

My Lords, I am grateful to noble Lords for their contributions. Before I get stuck in, I say two things. First, I cannot believe that I failed to congratulate both the grandparents of old and the soon-to-be grandparents. I share in the joy that has arrived and is coming. I also take a moment to pay tribute to the millions of unpaid carers across the country—grandparents and many other kinds. This Government value carers very highly and we recognise the vital and valuable contribution that they make every day.

I turn to the carer’s allowance. When we came into government, it became clear that there were far too many cases where hard-working carers, on carer’s allowance, had been left with large overpayments to be repaid—sometimes worth thousands of pounds. As a result, the Secretary of State acted to commission an independent review of earnings-related overpayments of carer’s allowance to understand exactly what had gone wrong and to make the necessary improvements for the future. The review is well under way; in answer to my noble friend, we expect to receive the report from the independent review in the near future, possibly late summer—that is one of those nice, flexible, government seasons. I hope that it will be before we are all shivering in this Room rather than sweltering. We will publish the report and our initial response as soon as is practicable thereafter.

The Government set up the review because we are determined to deal with the problems that the system has created for carers. The Secretary of State is eagerly awaiting the report, and she will give the closest consideration to every recommendation. However, as the noble Viscount pointed out, no Government could commit in advance to implementing every recommendation of an independent review sight unseen. I suspect that, if I had announced today that I would be very happy to commit to every recommendation, the Committee might raise a sceptical eyebrow about the genuine independence of the review. In fact, I do not know what the review will say and therefore I am in no position to say what is going to happen or what the Government will do about it. Having gone to the trouble of commissioning it and picking somebody independent to do it—Liz Sayce—the Secretary of State will manifestly look carefully at what comes out.

To stop the use of the new debt recovery powers on any overpayments of carer’s allowance—as Amendment 124 would do—until each and every recommendation had been accepted and implemented would not be proportionate. Maybe I could reassure the Committee that the Government have not been treading water while waiting for the review; we have already taken steps to address the problems that carers have been experiencing. In response to the noble Viscount, letters are sent out with prominent statements about the need to let the DWP know about changes in circumstances, and we send texts to people following alerts about earnings payments from HMRC, again to encourage them to do that.

We have basically been reviewing all our communications to make it as easy as possible for carers to tell the DWP when there has been a change in their circumstances that might affect their carer’s allowance. Crucially, we introduced the largest increase in the earnings limit since carer’s allowance was introduced in 1976. The earnings limit is now 16 hours’ work at the national living wage, and over 60,000 more people will be able to receive carer’s allowance between 2025-26 and 2029-30.

There are safeguards and protections for those with overpayments, both in existing law and in the Bill, including review and appeal rights, affordable repayment plans and, in exceptional cases, waivers of the debt. Those safeguards ensure that all debtors, not just those with debts from claiming carer’s allowance, are protected.

I remind noble Lords that we are talking specifically about these debt recovery powers. As I have gone on about extensively, these are powers of last resort to be used only with debtors who are not on benefit, including carer’s allowance, and not on PAYE employment. They are to be used only with those who receive income via other means and who can afford to repay, but choose not to do so. This amendment would put people in that category in a better position than those who are on benefits or on PAYE.

Amendment 127, again because I cannot commit in advance to implementing the recommendations of the review, would be even more disproportionate, because it would delay the entire Bill from coming into force until that had happened. Given the benefits that the Bill is expected to deliver, not just in the social security system but in the public sector more widely, that cannot be proportionate. We know that billions of pounds are being lost to public sector fraud; delaying this Act coming into force would put at risk an estimated £1.5 billion of benefits over the next five years, as scored by the OBR. This would place pressure on the Government’s fiscal position and on taxpayers, who deserve to have the confidence that money is being spent by the Government reaching out to those who are entitled to it. The Bill introduces new and important safeguards, including independent oversight and new rights of review and appeal to ensure the proportionate and effective use of the powers. I believe that these protections are sufficient and that we do not need to wait for the outcome of the review simply to proceed with the rest of the Bill.

I also make the point that some of the measures in the Bill are crucial for preventing the types of errors that we found in relation to carer’s allowance. For example, the eligibility verification measure, although we are not proposing to use it in relation to carer’s allowance, will improve DWP’s access to important data to help verify entitlement, ensure that payments of the benefits it covers are correct, and prevent the build-up of large overpayments in those three key benefits. It is important that the DWP is equipped with the right tools.

I will comment on a few questions that were raised. The noble Lord, Lord Vaux, as so often, made an absolutely crucial point: this is a very unusual benefit. It is a cliff-edge benefit and, therefore, if somebody goes over it even slightly, for example on earnings, it can make a very significant overpayment appear. As the Chancellor said at the Budget, we do need to look at the current cliff-edge earnings rules. It might be that a taper, for example, could incentivise unpaid carers to do some work, and reduce the risk of significant overpayments. However, I need to manage expectations. Introducing a taper into carer’s allowance is not without its challenges and could complicate quite a straightforward benefit significantly. It would need a significant technical rebuild. The DWP has begun to do some scoping work to see whether an earnings taper in carer’s allowance might be a feasible option in the longer term. But that could take some years to come through: I ought to be clear about that.

The noble Viscount, Lord Younger, made some important points about understanding that there is a range of types of error that have arisen in relation to carer’s allowance. I remind the Committee that there is no recovery from carer’s allowance of official error: we are not talking about what is classed as official error. These are errors. I will have to look at the record, but it is possible that the figure that the noble Lord, Lord Palmer, mentioned related not just to overpayments about earnings but to all the overpayments in carer’s allowance. Perhaps he could clarify that at the end and, if I am wrong, I apologise and I will clarify that to him.

The reason that is important to clarify is that, looking back, from 2018-19 to 2023-24, there was a fluctuation in the number of overpayments. The values varied. The main cause of carer’s allowance overpayments is a claimant having earnings that exceed the permitted limit. In 2023-24, the causes of new overpayment cases referred to our debt management were as follows: 57% of cases related to earnings, which was a lower proportion than previously, when it was nearly 60%; 23.5% of cases were caused by a claimant who was not providing care any more; 3.1% were caused by breaks in care; 15.8% were for other reasons, which could be that the claimant was in prison, was in full-time education, was getting another benefit or had moved abroad, or the person being cared for had died. There was a range of reasons. So there is a range of reasons why somebody may be overpaid, not all of which are related to earnings.

The job of the Government is to use the benefits of the independent review and the insights it will give us to try to make sure that we make it as easy as possible for claimants to tell us when changes happen, so they do not make those mistakes. Also, we will look carefully at what other recommendations are made and we will do whatever we can that seems reasonable within the powers and resources we have to see how we can make this better. We have also made a number of steps already to try to improve things, including by sending out messages, communicating and raising that ceiling for earnings in the first place. Given all that, I hope that the noble Lord will feel able to withdraw his amendment.

[Lord Palmer of Childs Hill (LD)]

My Lords, that was a very detailed debate, and a challenging one in some ways. I say to the Minister, from my time in local government, going round to people who were in council or housing association properties, that I often saw behind the clock the unopened envelopes from HMRC or the DWP. There is no excuse for people just ignoring it, but that is the real world. People do not always open envelopes that might have unfortunate things in them. As a chartered accountant, this is anathema to me, but the fact is that that was the reality of my 28 years on a local council. It was the case: people were not getting and opening the communication, even though it was properly given.

The Minister spoke about the taper. I can probably count on one hand how many recipients understand the taper. They know that they have received or not received a certain amount. The idea that everyone understands the taper is ridiculous.

What these amendments seek to do is purely to ensure that the completion of the review is done as soon as possible. I really do mean as soon as possible. If there is a delay in doing the review, I ask for that delay to be given to the claimants as well. Why should they not have a delay in dealing with it, if the Government cannot get their review together? Delays work both ways.

The Minister spoke about the review in the near future. The near future is so nebulous when people are being bullied on overpayments. The Minister asks about the £357 million. I honestly cannot give you the proper answer other than that I was given that figure as the overpayments since 2019. It is not immediate but it builds up like interest on a loan builds up.

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[Baroness Bennett of Manor Castle (GP)]

My Lords, I will put this amendment in the context of the discussion on the previous group. The noble Lord, Lord Palmer, and the Minister have been telling us regularly that this is all about people who do not engage. As the noble Lord said, he has seen people with a stack of envelopes behind the cheese board or whatever, but I have met many disabled people, particularly because of the demonstrations I have been on, for whom the arrival of the postman every day is a point of fear. People are absolutely terrified and are used to never receiving good news from the DWP. We have to acknowledge the context in which people are not engaging; it may be more than their mental health can take. We have to look at all these amendments in that context.

I warn noble Lords with subsequent amendments that I do not expect this group to take long, because we have already canvassed these issues extensively in terms of the use of algorithms and whether there is a human in the loop—to borrow terminology from another area of technology. Amendment 124A moves towards overpayments recovered from an individual. No final decision shall be considered valid or acted upon unless there is—the terminology here is important—

“meaningful and documented human oversight”,

and a human decision-maker has reviewed, understood and taken responsibility for the final determination. In some ways, this picks up the points made earlier by the noble Baroness, Lady Fox, about there having to be a responsible person in the DWP who can be held to account.

Under proposed new subsection (b), the recipient must have been

“provided with an individual explanation of the relevant decision in their case, including a clear explanation of how an automated system has impacted the decision”.

People need to know that there is this machine in the loop, so they at least understand what is happening to them, have a chance to make representations and are told how they can appeal if they want to appeal. We have canvassed these issues extensively. The amendment particularly addresses the situation that we saw in Australia with the enormous Robodebt scandal, with money being taken off people by a totally automated system. Many people knew that there were issues at the time and the Government in Australia kept being warned that this was going to be a problem. It was an unmitigated disaster, for which apologies had to be made, heads rolled and so on. This amendment is a sensible way in which to protect benefit recipients, as well as the Government from getting themselves tangled into things that they really do not want to get tangled in.

Finally, I suspect the Minister may say, “Well, this is going to happen anyway” but, if that is the case, why not put it into the Bill? I beg to move.

[Lord Palmer of Childs Hill (LD)]

My Lords, I will briefly address Amendment 124A, which seeks

“to secure fair administrative processes and meaningful human oversight”—

that is the point—

“for benefits recipients when … automated systems”

are used for decision-making. We have seen those problems with the Post Office and it happens all over.

The increasing adoption of algorithmic and automated decision-making within the public sector offers clear benefits in efficiency and consistency, but it also introduces significant risks, particularly around transparency, bias and the potential for unfair outcomes.

The Public Authority Algorithmic and Automated Decision-Making Systems Bill—that is a mouthful, is not it?—aims to regulate the use of these technologies, requiring impact assessments and transparency standards to ensure that decisions affecting individuals are accountable and subject to appropriate scrutiny. Amendment 124A aligns with those objectives by emphasising the need, as the noble Baroness said, for “human oversight”, especially where decisions have substantial effects on people’s lives.

It is essential that, when we embrace innovative technologies, we do not lose sight of the fundamental principles of fairness and accountability in public administration. Automated systems may be deployed in a way that mitigates risks to individuals and society and provides clear avenues for challenge and redress when errors occur. This amendment reinforces the importance of maintaining human involvement in critical decision-making processes, and ensuring that the rights of benefit recipients are protected and that public confidence in these systems is upheld. By supporting such measures, we can harness the advantages of automation while safeguarding against unintended consequences. I support this amendment.

[Viscount Younger of Leckie (Con)]

My Lords, there is a rather gloomy atmosphere here, but I am not quite sure why. My remarks will be relatively short. I find myself in a very unusual position—namely, I offer strong support for Amendment 124A tabled by the noble Baroness, Lady Bennett of Manor Castle. I do so not only because it incorporates vital safeguards but because it speaks to a principle that these Benches have highlighted and pressed for throughout Committee: that powerful tools must be matched by proper protections. I think we all agree with that.

This amendment could not be timelier. The use of artificial intelligence and automated systems is rapidly expanding across Whitehall, with departments increasingly deploying these tools to assist them in undertaking administrative tasks. There are clear benefits to this: efficiency, consistency and the ability to process large volumes of data quickly. AI can be a force multiplier. It can relieve overstretched teams and streamline basic tasks—I saw that when I was in post in the department—but it can never be a substitute for fair and human decision-making where individuals’ rights, entitlements and welfare are concerned.

The temptation to lean too heavily on automation is very real, particularly in areas such as social security where volumes are high and budgets are stretched. We have sought to highlight several times to the Government the additional workload and expense that we believe the provisions in this Bill will introduce for the department. Once we incorporate the need to consider additional needs, disabilities and those at risk of coercion—important safeguards that noble Lords across the Committee have supported—we start to face a massive workload. It is feasible, in light of this, that AI will increasingly be incorporated as part of this process, but we must ensure that this temptation is tempered by caution, principle and foresight. This amendment does just that; it makes clear that automation can assist, but not replace, the human judgment at the heart of a fair welfare system. Let there be light.

We are not legislating simply for this year, or even this Parliament. We are legislating for a system that must hold up under future Governments, under future pressures and in a future where Al capabilities are likely to expand even further. In just the past couple of years, we have all seen how dramatically these technologies have entered into our lives, often with little warning and even less scrutiny. The safeguards that we write into this Bill now are therefore not merely reactive, they are pre-emptive, and they are essential, a fact that groups such as JUSTICE have recognised and highlighted to us. That is why we have tabled our amendment with the same intent and near-identical wording. It is a proposal that we support wholeheartedly, and I commend the noble Baroness for bringing it forward at this stage.

The amendment would require four simple, yet fundamental things: first, that there is meaningful human involvement in any decision-making process that includes an automated element; secondly, that the individual affected receives an individual explanation, including how automation impacted their case; thirdly, that they are given a clear opportunity to make representations; and, fourthly, that they are provided with accessible information on how to challenge the decision. These are not high bars; they are the basic hallmarks of a just and humane administrative process.

There are also some important questions around accountability here. If there are no controls in the Bill on how AI is used, there is nothing, it seems to me, that would stop the department introducing this further as a matter of operational efficiency. However, this would have massive implications for the review process, which we have rightly discussed at length during Committee. If a decision is even partially informed by AI, who is held accountable? Could the civil servant in question blame AI instead of taking responsibility?

These are serious questions, and without proper safeguards in the Bill, we have no assurance from the Government that we could not, in the very near future, have a situation in which a person is attempting to review a case in which a mistake was made where the fault lies at the feet of a computer program, to put it bluntly. If we have clear human involvement in this process—guaranteed, not just promised—at least there is a person included in determining the final decision who can be held to account. This is a vital safeguard upon which the entire review mechanism would rest.

I can anticipate the response from the Minister: she will say that a human will always be at the end of a decision. However, it is not future-proofed, and I urge her to reflect on the long-term value of this amendment and to recognise that it would strengthen the Bill not only for today, but for the years to come. If the Minister can demonstrate to the Committee that these concerns will be protected against not only now, but in perpetuity—which is, of course, the effect of legislation when passed—I would be most grateful. However, from my perspective, I fear the Minister would struggle to meet this challenge because of how the Bill is drafted. I therefore believe there would be real value in the Government adopting this amendment to make sure that they, and the people they serve, are protected not only now, but into the future.

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In thinking that the issue of sickfluencers is important, it is almost as though the Opposition have picked up on some meme. Sickfluencers are a trivial, unimportant part of this debate. If the Opposition would like to know what is really influencing more and more people to think that they need welfare when perhaps they do not and should not have it, they should consider these broader cultural trends. I would be much more sympathetic if they went down that path. In case anyone thought that was a Second Reading speech, this is the last time I will speak, but I have wanted to get that off my chest for a while.

[Lord Palmer of Childs Hill (LD)]

My Lords, Amendments 125A and 129A relate to the prevention of fraud against public authorities, specifically by seeking to make it an explicit offence to facilitate fraud through the dissemination of relevant information online. I welcome these amendments because they deal with deliberate fraud, rather than chasing carers for errors. That is a difference that I would like to accentuate.

The Bill is designed to safeguard public money by reducing public sector fraud, error and debt, introducing new powers for the Public Sector Fraud Authority and enhancing the DWP’s ability to tackle fraud in the social security system. Amendment 125A seeks to strengthen this framework by targeting those who enable fraud through online channels, reflecting the reality that much fraudulent activity today is co-ordinated or facilitated via the internet. By explicitly criminalising the dissemination of information intended to assist fraud, the amendment aims to deter would-be facilitators and close a loophole that modern fraudsters increasingly exploit.

It is important, however, that such measures are balanced with appropriate safeguards to ensure that legitimate online activity is not inadvertently criminalised and that enforcement is both proportionate and effective. The Bill already provides for oversight, reporting mechanisms and independent review to ensure that the new powers are used appropriately. As we consider these amendments, we must ensure that our legislative response to online facilitation of fraud is robust enough to protect public funds while also safeguarding civil liberties and maintaining public confidence in the fairness of our legal system. In this way, I hope that the Bill and its amendments can deliver the Government’s commitment, which I believe they have, to tackle fraud without overreaching or undermining the rights of individuals and organisations operating lawfully online.

This is an important part of our discussions today because we are talking about deliberate fraud in the modern world, including online fraud, and we have had indications of personal situations from other speakers. This is about how things are moving in the digital age. These amendments are an important part of trying to tackle that, and I support them.

[Lord Verdirame (Non-Afl)]

My Lords, I was not planning to speak, but I thought I would say a couple of words. This is an important amendment and I support the objective that it is pursuing, although I also agree with the comments by the noble Baroness, Lady Fox, on being careful about using criminal law to deal with much bigger cultural and social problems.

However, the amendment needs some tightening in the subjective element, because at the moment it punishes a wide range of conduct. At one end of the spectrum, a person would commit an offence if they ought reasonably to know that

“the information or guidance provided … will likely be used to enable or encourage another person to obtain, or attempt to obtain, benefits through deception”.

There seems to me a rather loose connection between the person who would be committing the offence and the actual fraud; it is a bit too remote. At the other end of the spectrum, a person would commit an offence

“if they know … that the information or guidance provided … is intended to facilitate dishonest conduct under the Social Security Administration Act 1992”.

That does not strike me as a remote connection between the person whose conduct we would be criminalising and the actual dishonest conduct, so there needs to be a bit of tightening of the subjective element, making sure that it is more narrowly focused than it currently is.

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Moved by

[Lord Palmer of Childs Hill]

126: After Clause 100, insert the following new Clause—
“Impact of Act on people facing financial exclusion(1) The independent person appointed under section 64(1) of this Act (independent review) must carry out an assessment of the impact of this Act on the number of people facing financial exclusion.(2) The independent person must, 12 months after the passing of the Act—(a) prepare a report on the review, and(b) submit the report to the Minister.(3) On receiving a report the Minister must—(a) publish it, and(b) lay a copy before Parliament.”Member’s explanatory statement
This new Clause would look into the impact of the Act on people facing financial exclusion.

[Lord Palmer of Childs Hill (LD)]

My Lords, Amendment 126 would require a thorough assessment of the impact of the Bill on people facing financial exclusion. While the Bill’s intent to safeguard public money and tackle fraud is clear and necessary, we must not overlook the reality that those who are financially excluded are often among the most vulnerable in our society.

Financial exclusion can mean lacking access to basic banking services, credit or affordable financial products, which in turn imposes additional costs and barriers on those least able to bear them. Without a clear understanding of how the Bill’s provisions, such as new powers to access bank account information or recover debts, affect this group, we risk compounding their disadvantage and inadvertently causing hardship to those the social security system is meant to support. An independent assessment as proposed in this amendment would ensure that the implementation of the Bill does not create unintended consequences, and they would indeed be unintended for individuals already struggling to access financial services. It will provide Parliament with vital evidence of whether the Bill’s measures are proportionate and fair and whether additional safeguards or support are required for those at risk of exclusion.

This is about not weakening our response to fraud but ensuring that our actions are just and do not undermine the financial resilience of those who are most at risk of falling through the cracks. I know that the Minister and others mean well, but I urge the Committee to support this amendment, which guarantees that our efforts to protect public funds do not come at the expense of the most financially vulnerable in our communities. It is a balance. We need to be very careful that in stopping fraud we do not push people in vulnerable communities further down into debt and disappointment. I beg to move.

[Lord Vaux of Harrowden (CB)]

My Lords, I add my support at least to the intentions behind this amendment. We have had a number of discussions in Committee on the potential impact of layering costs and bureaucracy on financial services providers that relate to a particular class of people. In doing that, we risk incentivising those providers to stop providing services to that class of people—in this case, benefit recipients—and thereby potentially increasing financial exclusion.

The intention behind this amendment is right and I support adding it to the scope of the independent reviewer. However, I was not totally clear whether this applies to the whole Bill or just to Part 1, because it refers to the independent reviewer under Clause 64(1), which relates only to Part 1. This should relate to the whole Bill on a cumulative basis, because the cumulative impact of all the elements of this Bill may lead to greater changes in the behaviour of financial services companies than the sum of the individual changes themselves. We need to find a way of making sure that this covers the whole Bill and the cumulative impact.

Secondly, the amendment would require only a one-off report after 12 months. I am not sure that that would be sufficient. If there are impacts, as I fear there could be, they are likely to accumulate over time as banks decide that this is more difficult and therefore stop providing services. As we have talked about before, this is a question not of active debanking but more likely of stopping providing services over time. If we are to review this, we need to look at the impact more periodically—not necessarily annually, but over a longer period. I support the intention, but the amendment may need tweaking as it stands.

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[Lord Palmer of Childs Hill (LD)]

As the Minister said, financial exclusion—people not having access to financial matters—can be dreadful, and that is what the amendment is meant to deal with. In answer to the noble Lord, Lord Vaux, I had sought for it to apply to the whole Bill and not just part of it. We have had a lot of debate, so I beg leave to withdraw the amendment.

Amendment 126 withdrawn.

Public Authorities (Fraud, Error and Recovery) Bill

Lord Palmer of Childs Hill Excerpts

Committee stage
Monday 9th June 2025 Grand Committee

[Baroness Finn (Con)]

My Lords, our amendments in this group seek to understand the sort of relationship the Government envisage between the PSFA and other public authorities, how the PSFA is to be resourced and sustained, and how we can incorporate greater independent oversight into how the PSFA will cover its costs.

Last week, our discussions covered the effect of the costs of counterfraud investigations undertaken by the PSFA on other departments and public authorities. As our Amendment 8 recognised, the Bill’s current proposals permit the recovery of costs by the Cabinet Office from public authorities, which could potentially be to their detriment. As we and the noble Lord, Lord Vaux of Harrowden, pointed out, this could create a direct disincentive for those authorities to do the right thing and could lead them to fail to refer cases to the PSFA.

As it stands, the PSFA, as constituted under the terms of the Bill, cannot undertake proactive investigations into public authorities even if it has information which constitutes reasonable grounds for an investigation. This places a massive burden of trust on public authorities to refer themselves to the Cabinet Office before an investigation can begin. This burden of trust is often open to abuse, as my noble friend Lord Maude of Horsham demonstrated to the Committee in his interventions last week.

The Bill creates an additional and major disincentive for public authorities to do the right thing and invite an investigation because, under the its terms, it is likely that they will also be left out of pocket. As we will no doubt hear again in the spending review later this week, money is incredibly tight. Why would any public authority invite the Cabinet Office to undertake an investigation into fraud in its department, given that this would likely cost it money—something the Government have not denied and something they are unwilling to protect against? Amendment 23 seeks to understand this question further and is intended to provide the Government the opportunity to outline when they believe the Cabinet Office would seek to retain funds recovered on behalf of another public authority.

Can the Minister assure the Committee that if the money allocated to a public authority is retained by the Cabinet Office following a counterfraud investigation, this will not come at the detriment of any policies, programmes or schemes the authority in question was planning or already had in progress? Counterfraud investigations should deter fraud, combat wrongdoing and recover funds. If money has been allocated to a public authority, it seems both sensible and correct that any money recovered should be returned to the relevant authority and not siphoned off into the Cabinet Office.

I understand that Clause 10 states that agreement must be reached between the Cabinet Office and the relevant public authority before any money can be retained by the Minister. However, if a public authority has been subject to a counterfraud investigation, is the Minister certain it will have adequate agency in this discussion to make the case that it should have its money returned to it?

Let us imagine that a council has been subject to a counterfraud investigation by the PSFA. The money has been recovered; those responsible have been removed from office and have been subject to penalties under the terms of the Bill. There is no reason to suspect the council is at risk of being defrauded any further, but the reputational damage has been done. The council may even have lost money to the PSFA under the terms of the Bill, stretching its budgets even more tightly. The council is in a desperate situation, but it has done the right thing. The PSFA is asking to keep the money it has recovered.

Is the Minister certain that, in negotiating with the Cabinet Office over this question, a council in this state would have the capacity, resources and, crucially, agency and perceived legitimacy to do so? What are the reasons the Cabinet Office would give to justify why it needs this money? Would this be a conversation the council could expect to do well in or is this pretty much a done deal—the PSFA will keep keep the money it has recovered and the conversation would be more of a formality? Clarity on these questions now will help us and public authorities understand where they stand in these discussions and the extent to which the Cabinet Office will seek to augment its own budgets as a result of claiming funds originally allocated to public authorities.

In a similar vein, our Amendment 25 seeks to ensure greater oversight of the amounts that can be claimed by the Minister when undertaking their functions and exercising the powers provided for in the Bill. The Minister in the PSFA appears to be in a position to determine their own costs and to recover them under the powers outlined in Chapter 4 of the Bill. Our amendment seeks to incorporate greater oversight in this process, and to ensure that there is a check on the Minister’s powers to recover amounts, by introducing a role for a recognised judicial authority. Requiring a court or tribunal to award the reasonable costs incurred by the Minister will prevent the Minister charging potentially unreasonable costs without appropriate oversight. In our view, this is a sensible measure; we hope that noble Lords will support it and that the Government will adopt it as a sensible check on the power of the Minister under this part.

Our amendments in this group provide the Government an opportunity to address some questions that we have around where the money recovered from counterfraud investigations goes and whether the Government are confident that the discussion between public authorities and the Cabinet Office on this question will be a fair one that ultimately benefits the taxpayer. Furthermore, our Amendment 25 seeks to incorporate greater independent oversight over the amount of money that can be recovered as costs to the Minister to make sure both that this is proportionate and reflective and that there are safeguards on the power of the Minister; I hope that the Government will seek to incorporate it. I beg to move.

[Lord Palmer of Childs Hill (LD)]

My Lords, I see the first amendment in this group as a purely probing amendment to try to clarify matters; I trust and have every hope that, in the debates on the Bill, they will be clarified.

I ask the mover of Amendment 25 and the Minister to clarify something. I wonder about the change to the end of the amendment, which says

“awarded by a court or tribunal in relation to costs”.

I would have thought that that was covered already under Clause 13(2)(b)(i), which refers to

“costs that are awarded by a court or tribunal on or in relation to a claim for a recoverable amount”;

I agree with that. Then there is sub-paragraph (ii), which is about the Minister exercising their powers. Is that not covered by paragraph (b)(i) without adding it to (b)(ii)? This is a purely technical point because I think that it is there already.

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

Good afternoon, my Lords. I think that we are going to be as speedy as we were last week; the Chief Whip will continue to approve.

The amendments tabled by the noble Baroness, Lady Finn, and the noble Viscount, Lord Younger, would create additional burdens for the court system. They would also challenge the future viability of the PSFA and, therefore, its central mission of tackling public sector fraud.

Before I move on, I want to respond directly to a point made by the noble Baroness, Lady Finn. I believe that what is at stake and what is really being contested here is a matter of approach. As I said in Committee last week, being invited in to investigate by a government agency ensures a collaborative approach. We are hoping that, by working with government agencies rather than imposing ourselves on them—this is what we are learning through our current test-and-learn approach—the agencies will engage with us, meaning that we will be more likely to succeed in getting the evidence base that we need to determine the fraud.

On the specifics, the powers in the Bill let the PSFA investigate fraud against the public sector. A key rationale for this must be the deterrent effect. The PSFA must, therefore, be able to recover the money lost so that it can be used for public good and ultimately show fraudsters that their ill-gotten gains will not stay theirs for long. It is only reasonable that an element of costs recovery for the PSFA is part of this process. Amendment 23 would remove the ability of the PSFA potentially to charge for its services in future. The PSFA will act on behalf of other government departments, developing the expertise and capability required effectively to investigate fraud and recover the money lost. Providing the option to keep some of the recovered funds, subject to agreement with the public bodies concerned, will help fund the development of this expertise and will provide value for money for government and the taxpayer.

I reiterate this point to provide a level of clarity on the issue highlighted by the noble Baroness, Lady Finn. The PSFA would seek to recoup its costs and not necessarily to retain all the funds awarded. We will agree a portion with the public agency that we are acting on when the PSFA takes the case. That will be agreed in advance.

Amendment 25 limits how the PSFA can recoup reasonable costs incurred in exercising the Chapter 4 recovery powers, meaning that only a court or tribunal can award them. There is already scope in Clause 13 for courts and tribunals to award costs in relation to a claim brought by the PSFA, as highlighted by the noble Lord, Lord Palmer. However, this amendment would limit the operational flexibility of the PSFA and create extra burdens on the court system if we had to keep going back to the courts for all costs. A key aim of the Bill is to minimise the burden on the courts while ensuring that there are ample safeguards and protections in place. We already stipulate in the Bill that any costs charged have to be reasonable; we will be transparent about how we work out reasonable costs in our published guidance. However, we should always remember that investigating fraud and recovering losses is an expensive business for the Government. It is not fair that these costs are shouldered by law-abiding citizens. If you have committed fraud against the state, you should pay for this.

On how the PSFA wants to charge for its services, it is important that we recognise that, regarding money between departments and the impact on value for money, it is not uncommon for departments to charge each other for their services. The impact assessment sets out how the powers in the Bill will support the PSFA to recover up to £53.7 million over 10 years under current modelling. A significant proportion of this would otherwise have been lost to government. We create value for money by bringing funds lost to fraud or error back to government so that they can be used for public good. I hope that that explanation reassures the noble Baroness, Lady Finn, and that she will therefore not press her amendments.

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I hope the Minister will agree to look at these modest amendments, which have serious intent to make the Bill fairer.

[Lord Palmer of Childs Hill (LD)]

My name appears on these amendments because I and my party are worried about powers being given to Ministers rather than to the courts. This puts the power in the courts because “the Minister” does not necessarily mean the Minister; someone quite low down in the Civil Service could make this decision. I think it is open to abuse.

I hope that when the Minister replies she can perhaps tell me how this fits in with a garnishee order on a bank. Garnishee orders have long been part of our legal system, whereby a debtor can collect money from the bank direct with an order from the court. I am amazed that we can have such a Bill here—I brought this up at an earlier meeting with the Minister—without “garnishee” appearing in it, because this is part of our current legal system. I invite the Minister and the mover of the amendment to incorporate that in their reply.

[Baroness Finn (Con)]

My Lords, the amendments proposed in this group by the noble Baroness, Lady Fox, and the noble Lord, Lord Palmer of Childs Hill, provide us with an opportunity to question the Government on the mechanisms they propose using to recover money. It is vital, as the noble Baroness said, that the powers provided for in this part are proportionate and sensible.

We are particularly interested in Amendment 29, which chimes closely with our belief that a reasonableness test should be incorporated as part of the exercise of powers. In this instance, the Minister must “reasonably believe” that a liable person holds an account with a bank before the bank can be served with an account information notice. We need to recognise that compliance with the provisions in the Bill, however proper and correct, will come at a cost to banks. This amendment seeks to impose a duty of due diligence on the Cabinet Office, which, as the party responsible for issuing the notices, should rightly be held to a high standard before it starts imposing responsibilities and costs on third parties.

As it stands, the Bill risks creating a situation in which the work that should really be done by the Cabinet Office is shifted over to banks. It is feasible that a civil servant in the PSFA, without the need to meet a reasonableness test, could send out information notices to dozens of banks and wait for them to come back to them to confirm whether or not the person in question does, in fact, have an account. I am sure that the Minister currently anticipates that civil servants will send out only a limited number of notices to the banks that they believe are relevant. However, it is not unrealistic to imagine that, during a busy period, someone in the Cabinet Office could be tempted to serve all the banks on their list with a notice and wait for them to revert, having done all the work. More importantly, there is nothing to prevent a civil servant from doing so. This is a serious point: it risks the workload being shifted from the Civil Service over to the private sector, burdening banks with non-profit-making tasks that they are legally obliged to undertake. The Cabinet Office’s civil servants must strive to reach the highest standards; the law should be clear on this point.

Amendment 62, also in the names of the noble Baroness, Lady Fox, and the noble Lord, Lord Palmer of Childs Hill, speaks to a principle that we have identified in our Amendment 55; namely, that a person against whom a deductions from earnings order has been served should not be held to an indefinite order if it has been suspended. The Bill, as it stands, would allow an order to be restarted at any point. For the liable person—and, in the case of orders against a joint account, for the other person with money in the account—this would create a great deal of stress and uncertainty. It also grants the Cabinet Office the ability to wield a great deal of power over the liable person, with few checks. The Cabinet Office should have the power to recover funds from the liable person that has engaged fraudulently, of course, but, in our submission, it should not have the power to threaten a liable person with a suspended deductions order for an unlimited period of time.

If it makes the decision to suspend an order, the Cabinet Office should be tied to a specific period of time in which it can restart the order. The Cabinet Office should be held to this standard, and the liable person should be protected adequately. We disagree with the noble Baroness, Lady Fox, and the noble Lord, Lord Palmer, that a suspended order should never be restarted, although we firmly agree on the principle that this power should be checked and should not be left open for an unlimited period of time.

I hope that the Government will consider these proposals as reasonable checks on the power of the PSFA in relation both to its ability to shift work over to third parties and to how it can wield these powers over liable people. We rightly expect the Cabinet Office to exercise these powers to a high standard. Ensuring that it does not outsource its workloads and that it concludes any checks or procedures within a certain time period are both proposals that speak to this high standard. I am sure that the Minister is confident that the officials in her department will meet these standards and, as such, that she will have no hesitancy in being able to back these proposals.

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

My Lords, I am assured that it is in the Bill. I ask noble Lords to bear with; as soon as that has been passed to me, I will highlight exactly where in the Bill it is.

It is in Clause 12. That was like magic.

[Lord Palmer of Childs Hill (LD)]

Could the noble Baroness explain again why a garnishee order—the collection of debt from a third party—is not mentioned in the legislation at all?

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

My Lords, a garnishee order is used to obtain money directly from a third party. That is not the process that we are undertaking; we are regaining money directly from an individual, as opposed to a third party. I am happy to write to the noble Lord with more guidance on that, but that is my understanding.

I move on to Amendment 29, which would necessitate a “reasonable belief”, rather than a “belief”, that a bank account is held by the liable person prior to the PSFA requesting bank statements from the bank to inform decisions on direct deduction orders. In practice, the PSFA will already be operating at this level as it will already, through the course of its fraud investigation, have developed an overview of the liable person’s financial information.

In addition, having thrilled the Committee with my recitations from Managing Public Money last Wednesday, I am excited to be able to quote from another government page turner, The Judge Over Your Shoulder. All “public law powers” must be exercised with

“reasonableness or rationality—following a proper reasoning process and so coming to a reasonable conclusion”.

Making a Minister’s belief a “reasonable” belief therefore has no effect, because they are already subject to it.

In addition, Clause 19 lets the PSFA issue a general information notice to banks, which provides confirmation of the accounts that a liable person holds. The amendment is therefore not adding anything new.

Amendment 62 seeks to remove the ability to restart a deduction from earnings order once it has been suspended. For some context, a deduction from earnings order is a mechanism by which public funds lost to fraud and error can be recovered directly from a liable person who is not in PAYE employment. Having listened to the debate, I have some sympathy with noble Lords; however, it is important that the PSFA remains able to issue, vary, suspend and restart, or revoke a deduction from earnings order, for very human reasons.

We need to be able to suspend and restart a deduction from earnings order due to a temporary change in the liable person’s circumstances; for example, if they were temporarily hospitalised. People’s lives, as we know, can be messy; it is important that we have the flexibility to recognise that. Where it is more appropriate to revoke the order altogether, this is provided for in Clause 47.

The purpose of the amendment therefore overlaps with existing provision which gives the necessary flexibility while maintaining clear communication with both employers and liable persons, maintaining a fair and transparent debt recovery process. If this provision was adopted, an unfortunate consequence would be the end of such flexibility and the reluctance of anyone to suspend payments due to having to restart the process.

I hope that this explanation reassures noble Lords and that the noble Baroness will withdraw Amendment 27.

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[Lord Vaux of Harrowden (CB)]

My Lords, I will say very briefly that I support the concept, at least, behind these amendments. It cannot be right that the Minister marks his own homework. The noble Lord, Lord Verdirame, talked about what it says in the guidance notes. I do not know whether this is the right mechanism but, at the very least, if a review is to be carried out by the department, it must be by somebody who was not at all involved in the original decision and is not answerable to anybody directly involved in the decision-making process. That needs to be set in stone somewhere, not just in guidance notes or whatever that can be changed at a whim by any future Government. This is one of the weaknesses throughout this. We have lots of safeguards, but they are all in codes of conduct, future statutory instruments or whatever; they are not set in stone in the law and therefore are not strong safeguards. That is a general thought.

I have a feeling that I know what the answer will be: if they do not like the outcome of the review, they can go to the First-tier Tribunal. But that is a big leap from going back and saying, “Can we have an independent review?”. A First-tier Tribunal is, effectively, a full legal process. We need something that works and in which people can have confidence at the first level, before needing to take it to the much more legalistic, costly and complicated process of the First-tier Tribunal. I think the Minister will say that that is the answer, but I am not sure that I agree.

[Lord Palmer of Childs Hill (LD)]

This is a popular set of amendments. I agree entirely that there should be an independent review. That is something that somehow has to be in the Bill. What worries me about the noble Baroness’s amendments is that they talk about an “independent person”. Those are the words in the amendment. An independent person is somewhat different from an independent review. I can see a wonderful job opportunity in having panels of independent persons who could be available to be appointed.

During the debate on this Bill, one has somehow to put flesh on the concept of an independent review, how it is set up and how people can make their complaints. One of the real problems of modern life is that, if you want to make a complaint, you have to be able to do it on a computer and use IT. Is there going to be a process whereby you do this in a letter form in some way or another? These amendments, in seeking to put right the lack of an independent review, latch on too closely to the concept of an independent person, which in my view is completely different.

Public Authorities (Fraud, Error and Recovery) Bill

Lord Palmer of Childs Hill Excerpts

Committee stage
Wednesday 11th June 2025 Grand Committee

[Lord Vaux of Harrowden (CB)]

My Lords, I was not going to speak on this group, but, as the noble Baroness, Lady Anderson, proved the other day, Amendment 60A is not necessary because Clause 12 sets out clearly that these orders can be used only where there has been a final determination of the amount owing by the court or where it has been agreed.

However, I support Amendment 61A. Frankly, it is becoming a bit of a weakness in an awful lot of areas that the impact assessments that come with legislation are regularly quite poor. It is incredibly important that, when we make regulations that will have impacts on people, we understand what those impacts are.

I have one other question that I probably should have dealt with by means of an amendment, but I have only just spotted something. Why are regulations made under Clauses 37(2)(c) to (f) subject to the negative procedure and not the affirmative procedure?

[Lord Palmer of Childs Hill (LD)]

My Lords, the amendments tabled by the noble Baroness, Lady Finn, and the noble Viscount, Lord Younger of Leckie, raise important considerations about procedural fairness and transparency in the implementation of the Bill. Amendment 60A, which would allow applicants to request a review into the existence or value of the payable amount, would provide a valuable safeguard, ensuring that individuals have an accessible means to challenge decisions where there might be uncertainty or dispute. This aligns well with the principle of natural justice and could help prevent errors going uncorrected.

Amendments 61A and 61B focus on the mechanisms surrounding direct deduction orders, emphasising the need for accountability and parliamentary oversight. Requiring an impact assessment to accompany any changes to the processing of these orders, as proposed in Amendment 61A, would encourage transparency about the potential costs and effects on banks’ operational capacity. Similarly, Amendment 61B’s provision that consultation outcomes must be laid before Parliament prior to implementation would ensure democratic scrutiny. Together, these amendments would contribute to a more open and considered approach, balancing the efficient recovery of public funds with the need for oversight and due process, and I support them.

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

My Lords, this has been a helpful and constructive debate. I shall just clarify some points that have been made and respond directly to some of the questions. I think I can answer them all; if not, I will reflect on Hansard.

Amendment 60A would enable the liable person to appeal against the existence and value of what they owe as a result of fraud or error as part of the appeal process for direct deduction orders. I remind noble Lords that direct deduction orders are used only if a liable person has opted not to come to the table and negotiate. This is not the first way in which we would have engaged; it is at the end of a process.

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[Lord Palmer of Childs Hill (LD)]

My Lords, Amendments 61C and 61D in the names of the noble Baroness, Lady Finn, and the noble Viscount, Lord Younger, seek to ensure that liable persons receive clear written communication regarding the outcomes of reviews and that Ministers demonstrate due consideration of wider circumstances when requested. This kind of transparency is crucial in practice, as it helps individuals to understand the basis of decisions affecting their finances and provides reassurance that their personal situations are being taken into account. For many people facing recovery actions, receiving clear, accessible information can make a significant difference in navigating the process and seeking further recourse, if needed.

Amendments 61E and 61F, alongside Amendments 62A and 62C, address important procedural and operational details that could impact on both individuals and employers. For example, limiting the scope of regulations as proposed in Amendment 61E may prevent regulatory overreach, providing clearer boundaries for those affected. Consulting employers on costs regarded as reasonably incurred, as proposed in Amendment 61F, encourages dialogue and can help to avoid disputes over financial responsibilities. Meanwhile, the provisions to restrict the restart of suspended deduction requirements after 24 months, as proposed in Amendment 62B, and to ensure written reasons for revocation of deduction orders, as in Amendment 62C, introduce important safeguards that promote fairness and clarity. In practical terms, these measures help to reduce uncertainty for both liable persons and employers, fostering greater trust and smoother administration. I support these amendments.

[Baroness Fox of Buckley (Non-Afl)]

My Lords, I wanted to reiterate my particular support of Amendments 62A and 62B, even though they do not go as far as my amendment in relation to suspended orders. The sense of a sword of Damocles hanging over people is something that we could do with getting rid of. That would be an easy thing for the Government to accept without in any way compromising the aims of the Bill.

In relation to the other amendments, which I broadly support, I want to emphasise something that I keep thinking as I read the Bill and sit through Committee. Many aspects of the legislation can create an atmosphere of fear, uncertainty and sometimes even paranoia about what is going on if there is a sense of secrecy. This could be alleviated with the opening up of human communication to explain reasoning. These are difficult situations. We are talking, in some instances, about people who have committed wrongdoing of some sort, but it is important that liable persons have a sense of understanding the process. Very often, the way that the process gets stuck behind closed doors has created all sorts of problems in parallel situations.

I want to emphasise how, if things are left to internal processes, it can reduce them to hollow box-ticking. Civil servants or whoever knowing that they can be answerable will ensure that better work is carried out. It will also help to smooth the way for people to take this Bill seriously and not see it as some grand state surveillance conspiracy. It is important, in order to give credibility to the fraud recovery at the heart of the Bill, that the Government are seen to be as flexible as possible about all parties being held to account for what would otherwise be seen as some quite draconian powers.

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[Baroness Fox of Buckley (Non-Afl)]

My Lords, I will be very brief. I have a lot of sympathy with most of the amendments in this group, apart from Amendment 63A, which fills me with dread. Fraud facilitation sounds as though it is a new crime, but I do not think this is the right place to bring it in. I appreciate that it does not necessarily have a criminal penalty, but it is also not entirely clear what it is.

I know that the Opposition have been pushing the problems of “sick influencers” in another Bill—this is a bit of a theme—but I get very nervous about requiring the authorities to trawl through people’s social media accounts yet once more to see what they are saying, then to blame them for things that happen. When I think of examples that I have been shown of “sick influencers”—but there are others—there is a thin line between people who are trying to give hacks to individuals on how to fill in labyrinthine forms and cope with the welfare system and people who show them how to cheat. I therefore urge against this: it is a can of worms, which I would keep well away from.

There is also a danger that you will allow individuals to abdicate responsibility by saying, “I did it only because I was told to by the influencer who I saw on Instagram”. This goes against the spirit of due process and of taking responsibility.

[Lord Palmer of Childs Hill (LD)]

My Lords, Amendment 63A addresses the important issue of those who facilitate fraud by providing information, advice or support. It proposes that such individuals could be subject to penalties. I believe that this measure helps to close potential loopholes and hold accountable not only primary offenders but those who enable wrongdoing. From an individual’s perspective, this could strengthen the integrity of the system and act as a deterrent against abuse.

Amendment 63B seeks to prevent the Minister from unilaterally determining penalties for persons who have not received a payment, which is crucial to protecting individuals from unfair or arbitrary penalties that could cause undue financial or reputational harm.

Amendments 63D and 64A focus on transparency, accountability and procedural fairness—elements that directly affect the experiences of those subject to the Bill. Providing written reasons for decisions following a review, set out in Amendment 63D, would ensure that individuals fully understand the outcomes and the rationale behind them, enabling them to respond appropriately, or seek further recourse if necessary. Amendment 64A would remove the Minister’s sole authority to change the appeals process and would instead require independent review—we have discussed in previous sittings what “review” and “independent” mean—and parliamentary oversight. It would introduce vital protections for individuals and guarantee that any changes to how appeals are handled are thoroughly scrutinised, preserving fairness and maintaining public confidence in the system’s impartiality. On that basis, I support these amendments.

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

My Lords, these amendments all pertain to the scope, application and oversight of the civil penalties measures. The measures have been designed using established cross-government best practice so that the PSFA may effectively deter and recuperate money lost to fraud and include numerous safeguards for individuals and businesses.

I find myself in the unique position, so far in this Committee, of agreeing with the noble Baroness, Lady Fox, although maybe not for the reasons that she set out, on Amendment 63A, which would unnecessarily extend the legislation by adding a definition of “help” to Clause 50. The Fraud Act 2006 establishes the fraud offence, which includes an individual making

“a gain for himself or another”.

The Fraud Act does not define “help” in terms of making a gain for another. This is because the Act focuses on the “dishonest intent” of a fraudulent act. Under Clause 70(1)(c), the offence at common law of conspiracy to defraud is already punishable under the Bill. Clause 70(1)(b) includes and covers Sections 6 and 7 Fraud Act offences. This allows for penalties to be issued against the fraud “influencers” we have already discussed during the Bill’s passage. The offence at common law of conspiracy to defraud is also already included in our definition of fraud. It is therefore unnecessary to define “help” in order to use either the Fraud Act or this Bill, although I was very tempted to quote Beatles lyrics—that may just be the time of day.

Amendment 63B would amend Clause 52 by replacing the Minister with the First-tier Tribunal in cases where a fraudster attempts to take public money but is stopped before they receive the payment. There is existing precedent for not using the First-tier Tribunal as the first-instance decision-maker: for example, in the Home Office for the employment of illegal workers. The legislation also includes the right to appeal a decision to the appropriate court following the receipt of a final penalty notice—I will come on to that.

Amendment 63C seeks to broaden the requirement of Clause 58(4) beyond Clause 58(2)(c) so that it may apply to Clause 58(2)(a) and Clause 58(2)(b). This is unnecessary, as Clause 58(3) already requires the Minister to give notice to an individual if the penalty is upheld. While I recognise its intent, it is unnecessary to include Amendment 63D in the Bill. While there is no obligation under common law to provide an explanation for a positive decision—that is, to amend or cancel the penalty—authorised officers will do so as part of the review process. They will also provide an explanation for a decision to amend or cancel the penalty as part of the review process. The civil penalties code of practice and further guidance will support authorised officers.

Amendment 64A would add additional unnecessary complications to the legislation. It is the intent of the legislation not that regulations may be made to reduce or abolish the appeals provisions for penalty notices but that any further regulations may improve, streamline or make the appeal process more efficient. For example, appeals for civil penalties may be heard at the same time as appeals against debt recovery notices.

I turn to the specific points raised by noble Lords. In response to the noble Baroness, Lady Finn, I remind the Committee that the tribunal appeal is already in the process at a later stage, that of determining the penalty. Bringing the tribunal in earlier would add time and burden. I think that I have covered the other points in my speech, and the noble Baroness, Lady Finn, will remind me if I have not—she may be about to—but I hope that my explanations reassure noble Lords and that the noble Baroness will therefore withdraw her amendment.

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Moved by

[Lord Palmer of Childs Hill]

65: After Clause 63, insert the following new Clause—
“Report on public sector fraud during COVID-19 pandemic(1) The Minister for the Cabinet Office must, within six months of the passing of this Act, lay before Parliament a report evaluating the extent of public sector fraud that occurred during the COVID-19 pandemic.(2) The report must include—(a) an account of fraudulent or erroneous payments made by or on behalf of public authorities, including but not limited to the Department of Health and Social Care and NHS England,(b) a review of how public procurement practices in place between March 2020 and December 2021, including—(i) the use of high priority and expedited contracting for suppliers, and(ii) the role of political appointments and personal connections in procurement decisions, may have contributed to fraud against public authorities,(c) the cost to the public purse of fraud against public authorities during the COVID-19 pandemic, and(d) an assessment of the adequacy of Government oversight and other measures then in place to prevent fraud against public authorities.(3) Where the report finds or concludes that there were—(a) failings in Government oversight and other measures then in place to prevent fraud against public authorities, or(b) any action or inaction by the Government which enabled fraud against public authorities,the Minister must make a statement to the House of Commons acknowledging these findings and setting out actions planned to ensure any failings are not repeated.”

[Lord Palmer of Childs Hill (LD)]

My Lords, Amendment 65 in my name would require the Minister for the Cabinet Office to,

“within six months of the passing of this Act, lay before Parliament a”

comprehensive

“report evaluating the extent of public sector fraud that occurred during the COVID-19 pandemic”.

The Liberal Democrats have long championed transparency, accountability and robust oversight of public funds. This amendment aligns with those values by ensuring that Parliament receives a clear, detailed assessment of how fraud had an impact on public resources during an unprecedented crisis. Without such transparency, we risk missing critical lessons that could inform future safeguards and improve the resilience of our public sector. The pandemic presented unique challenges that, unfortunately, created opportunities for fraud on a scale not previously seen. It is only right that we fully understand the scale and nature of the issue, not to assign blame but to strengthen our systems and protect taxpayers’ money.

This amendment reflects the Liberal Democrat commitment to evidence-based policy and open government. By requiring this report, we would promote accountability and ensure that future emergency responses are better equipped to prevent fraud, protecting public trust and ensuring that resources reach those who genuinely need them. There will be other events; we want to set the scene so that they can be dealt with. That is what this amendment seeks to do. I beg to move.

[Baroness Coffey (Con)]

My Lords, I rise to speak to this amendment because I was at the Cabinet table when Covid-19 hit this country. I am very conscious of the arduous activity that went on among brilliant civil servants but, of course, mistakes were made, as well as successes.

It is interesting to try to understand why the noble Lord, Lord Palmer of Childs Hill, wants to go into this matter further, recognising that, in Parliament, there have already been several Select Committee inquiries; one was specifically done on fraud. Of course, we also have the public inquiry that is under way, to which the Government are contributing. I am trying to understand the purpose of this amendment and this extra report, recognising that the Government will in no way make any comments until the inquiry has concluded.

My understanding is that the inquiry is still going to take evidence in 2026. For what it is worth, as I am sure the Ministers here will be relieved to know, I am absolutely convinced that this Bill will become an Act of Parliament well before the end of 2025. So there is something here of an odd overlap. I understand that this will continue to be a subject of interest.

This is quite a wide ranging-element. I know that fraud happened. There is no doubt of that. However, we also averted fraud in the DWP. We managed to stop £1.6 billion going out on one particular weekend by intervening. There were plenty of attempts at fraud and, unfortunately, there were successes. Some of those people who committed that fraud are now in jail, thanks to the endeavours of the Government.

The noble Lord, Lord Palmer of Childs Hill, talks about resources that the country may have been deprived of when addressing the issues of Covid. I can honestly say to your Lordships that no resources were set aside at all. This is one of the reasons why there have been considerable challenges on aspects of needing to repay the debt that may have been acquired due to spectacular extra financing, whether that was through businesses or about people who had never claimed benefits in their life before, making sure that they got the money that we believe they were entitled to. That was while recognising that some of the easements initially may have been subject to some fraud, but we also made every effort to try to stop it. I have already given an example of where, in one weekend, £1.6 billion was averted.

For that purpose, the amendment genuinely is unnecessary. The statutory inquiry, I hope, will not be the longest-running statutory inquiry because that is not what the country needs to consider. It would not be the best use of government resources to initiate their own further inquiry and honour this amendment.

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

My Lords, this is what I can say currently, but if there is additional clarification, I will come back to the noble Baroness. Mr Tom Hayhoe’s appointment is a fixed one-year appointment. He will be required to provide a report to Parliament, which will present lessons and recommendations for procurement in future during a time of national crisis, so he will be reporting on his efforts outside and within the Treasury.

[Lord Palmer of Childs Hill (LD)]

My Lords, I have a rearguard action on this amendment, because it seems strange to me—and it may seem strange to anybody among the public—that we can have a Bill called the Public Authorities (Fraud, Error and Recovery) Bill, but we do not recognise within that Bill one of the biggest efforts of fraud that occurred in this country during Covid-19. Those still rumble on—those billions of pounds. For a Bill called the Public Authorities (Fraud, Error and Recovery) Bill not to include those is a grave error.

There may be some crossover and duplication, but if there is, it does not matter, because it is in the Bill and the Government will not have to pursue things if they are being dealt with elsewhere. They may be dealt with elsewhere, but there has to be a backstop, and the backstop should be in this Bill. It will do no harm in future to have it in the Bill, even if other things may address the problems that occurred and could, sadly, occur again when another event takes place. Having said that, I beg leave to withdraw the amendment.

Amendment 65 withdrawn.

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[Baroness Finn (Con)]

My Lords, our Amendments 67 and 68 in this group work together to introduce new clauses on annual reporting obligations under the Bill: first, on the use of powers conferred by Part 1 and, secondly, on the extent of fraud against public authorities. These are, on their face, modest amendments: they do not alter the structure of the Bill; they do not restrict the powers being granted; and they do not place unreasonable burdens on Ministers or departments. They are grounded in a principle that is both simple and fundamental to good governance: that Parliament and the public have a right to know how powers are being used and whether those powers are making a measurable difference.

Amendment 67 would introduce an annual reporting requirement on the use of powers conferred under Part 1. This part confers significant powers: powers to impose penalties, to recover funds, to compel the provision of information and to act across a broad range of public authorities. These are substantial tools in the Government’s arsenal against fraud and error, and we all agree that public money must be protected and those who exploit or defraud the state must be held to account.

But power must always be accompanied by oversight. The public has a legitimate interest in how these tools are used, how often, in what context and with what effect. An annual report will provide that vital lens of scrutiny. It will allow Parliament to see whether the powers are being exercised proportionately and effectively and whether any patterns or concerns are emerging that warrant further attention. Without such reporting, we risk creating a system where power operates behind closed doors: not necessarily abused, but unexamined; not necessarily misused, but not explained. That, over time, can erode public trust not just in anti-fraud enforcement but in the fairness and accountability of public administration itself.

This amendment would simply require the Minister to prepare and publish an annual report on the use of the powers granted under Part 1, beginning within 12 months of the commencement of Clauses 1 and 2 and continuing annually thereafter. The report must then be laid before both Houses of Parliament within seven days to ensure that this information is not only collected but promptly placed in the public domain.

This is not bureaucratic clutter; it is democratic hygiene. It provides Parliament with the tools that it needs to track the implementation of this legislation and to hold the Executive to account. It allows Select Committees, Members of both Houses and the public to ask informed questions and pursue necessary follow-up, where appropriate.

The second amendment, Amendment 68, complements the first by requiring an annual report on the estimated scale of fraud against public authorities, based on the Government’s internal estimates. We have heard repeatedly, both in this Committee and outside it, that public sector fraud is a serious and growing challenge, yet it remains notoriously difficult to quantify. Estimates vary, methodologies differ and the scale of undetected fraud, by its very nature, is hard to pin down.

Nevertheless, if we are to take the fight against fraud seriously, we must begin by being honest about the scale of the problem. This amendment would compel the Government to do just that—to report annually on their internal estimates of fraud against public authorities and to lay those findings before Parliament. Without a clear sense of the scale of fraud, we cannot effectively assess the return on investment in anti-fraud measures, we cannot identify which sectors are most at risk and we cannot hold departments to account for their own controls and responses.

Just as importantly, regular public estimates create pressure for improvement. When departments know that the levels of detected or suspected fraud will be publicly disclosed, they have a strong incentive to strengthen internal controls and to invest in fraud detection systems. The result is not only transparency but improvement in practice. This principle speaks to the heart of another one of our goals: that public authorities take increasing responsibility and ownership for identifying and tackling fraud internally. This amendment is a mechanism that would promote this.

It is worth emphasising that this amendment does not require, unfortunately at present, perfect precision. It does not ask the Government to do what is not feasible; it asks for a summary of internal estimates informed by the Government’s data, audits and risk assessments. That is both reasonable and achievable. However, I take this opportunity to call out that data should be improved. The variances in the estimates currently produced by the Government are massive, and it is clear that the Government themselves do not have a particularly accurate view of the challenge that we face. The Government must achieve more accurate data reporting in this area and make this available. We need to strive for a situation in which good, accurate data is provided to Parliament, not the wildly varying estimates that we currently see.

Ultimately, we cannot allow the state to hide behind averages, yet that is precisely what it does. It is all too easy for the Government to delay publication of the annual fraud landscape report; when it does appear, it risks being only the most convenient version of the truth—aggregated figures, smoothed-out estimates and numbers stripped of detail with no departmental breakdown, timeline or accountability. That is not transparency; it is evasion. A Government who lose billions to fraud cannot be allowed to drip-feed the facts on their own terms.

Together, these two amendments serve a broader purpose. They ensure that this legislation not just empowers the state to act but commits the state to account for how it acts and to explain whether its actions are having the intended effect. They are not burdensome or oppositional; they are the kind of clear, regular reporting obligations that should be part of the design of any legislation that grants wide-ranging enforcement powers and seeks to solve systemic problems. Let us remember that the effectiveness of anti-fraud efforts cannot be judged solely by the strength of powers on paper; it must be measured by their use in practice and by the visibility of that use to those whom the powers are ultimately meant to serve—the taxpayer and the public.

Transparency is not a hindrance to enforcement; it is an essential condition of its legitimacy. These amendments would not hinder the Government’s ability to act. On the contrary, they would enhance its credibility in doing so. They would signal to the public that the Government are not only determined to tackle fraud but willing to be open about their efforts and accountable for their progress. They would allow Parliament to play its rightful role in monitoring implementation, asking the right questions and proposing further refinements when necessary. In an age when public trust in institutions must be earned and re-earned, these small acts of transparency are the building blocks of that trust.

I urge the Minister and noble Lords across the Committee to support these amendments as practical, principled and proportionate contributions to a more transparent and effective anti-fraud regime. I beg to move.

[Lord Palmer of Childs Hill (LD)]

My Lords, these amendments are very close to my party’s heart. I warmly welcome Amendments 67 and 68, which would place an important emphasis on transparency and accountability by requiring the Minister to publish annual reports on the use of powers under Part 1 of the Bill, as well as on the estimated scale of fraud against public authorities. Too often, no one knows about the scale.

These measures represent a vital step forward in ensuring that Parliament and, by extension, the public, receives regular, detailed information about how these powers are exercised and the ongoing challenges faced in tackling fraud. Such openness is essential because it is openness that solves these problems, builds trust in the administration of public funds and allows for informed scrutiny and debate. From my party’s perspective, these amendments align closely with our long-standing commitment to open government and evidence-based policy-making. By mandating annual reporting, they would help to illuminate the practical impact of the Bill and provide the data that is necessary to assess whether these powers are effective, proportionate and fair. This ongoing oversight will be invaluable in refining approaches to fraud prevention and recovery and ensuring that public authorities are both empowered and held accountable.

I look forward to supporting these amendments as the Bill goes forward, as well as to continuing to work to strengthen transparency and public confidence in this important area.

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

My Lords, I thank the noble Baroness, Lady Finn, for raising the important issue of the annual reporting of the PSFA on both the use of the powers conferred on it in the Bill and the extent of fraud against public authorities.

Under Clause 64, an independent person will be appointed through the office of the Commissioner for Public Appointments as a regulated appointment to oversee the use of the powers that this Bill conveys on the PSFA. We will appoint someone with the right skills and demonstrable independence. The independent person will proactively review the PSFA’s investigative functions and use of powers, which will culminate in regular reports being produced on an at least annual basis for the Minister for the Cabinet Office.

I know that the noble Baroness cares about ministerial oversight and accountability. The powers granted to the Minister for the Cabinet Office will be delegated to trained authorised officers; I can assure her that there will continue to be strong and regular ministerial oversight of their safe and effective use. Once the Minister has reviewed the report, it must be laid before Parliament. Reports will both provide assurance on where powers are being used appropriately and challenge where improvements could be made, ensuring that civil servants are using the powers in this Bill as intended. They will provide assurance that suspected cases of fraud are being investigated in accordance with the legislation, codes of practice and guidance; and that that is being done effectively in the pursuit of the intentions of the Bill.

The findings or summary of any and all independent oversight, including the independent person’s report, will be published on an annual basis in the interests of transparency. External oversight bodies will also report on the use of powers by the PSFA following inspections. These reports will be made publicly available. With regard to annual reporting on the extent of public sector fraud, the PSFA oversees the counterfraud performance of ministerial departments and public bodies. It already publishes a report on the extent of fraud against public authorities: the Fraud Landscape Report. I hope that that reassures noble Lords.

I want to address one point made by the noble Baroness, Lady Finn, on how the Government estimate the level of unknown fraud and error. The best available evidence suggests that the level of fraud and error in unexamined areas of government activity is between 0.5% and 5%. This is based on a Cabinet Office review of around 50 fraud and error estimates that includes every major department. Methods used across government to estimate the extent of fraud and error include statistical sampling, modelling and benchmarking. More detail can be found in the NAO report.

There are already provisions to review the use of powers the Bill conveys on PSFA and reporting relating to counterfraud activity across government. I hope that this explanation reassures noble Lords and that the noble Baroness, Lady Finn, will withdraw her amendment.

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[Baroness Fox of Buckley (Non-Afl)]

My Lords, I consider these three amendments as probably three of the most important amendments that have been tabled so far. I congratulate the noble Baroness, Lady Finn, for explaining why so well. They reflect a number of other concerns—it is not as though we have not heard them before—and articulate well the sense of responsibility that we should all have in this Room, as we scrutinise the Bill, in terms of the enormous amount of power that this legislation gives the state. It is why ministerial and parliamentary oversight is important and cannot, in any way, be neglected.

An astounding amount of power has been created in the name of tackling fraud. I sometimes think that it is disproportionate. Regardless, one would be much more reassured if there was at least the knowledge that this was always done by and answerable to Ministers and Parliament. Parliamentary oversight of something as powerful as this is essential and has been reflected in a number of amendments.

I have some other quick points. I thought that the noble Lord, Lord Palmer of Childs Hill, made a compelling argument for the Covid inquiry. It is true that, when I tell people that I am working on a fraud Bill, without exception they say, “The Covid stuff?” I say, “Possibly not; it is not there”. I listened and heard what the noble Lord said about why it is not appropriate, but I wanted to note that.

Of course, it was an extraordinary period for all the reasons that have been explained, but it has become almost impossible since to work out who said and did what to whom. In other words, there is little in the way of tracing accountability and being clear about ministerial sign-off, so I think the transparency register is a brilliant idea. It is clear; if you have these powers, let us see who signed off. No Minister should be frightened of that, because it is important for public accountability and, as has been said, is a way of ensuring that you are not held accountable for things that you did not sign off. It is a much clearer way of understanding it.

I am rather bemused by the final amendment, Amendment 68C. In my background reading, I have read a lot about the crisis in people who are sceptical about the Bill, who are worried that there are no people who are suitably qualified to see its powers through, so the way that this amendment has been posed seems sensible to me.

It is ironic, because there is an argument familiar to those who have been following the schools Bill about whether everybody who stands in front of a group of pupils needs to be qualified or not. “Not always” is my opinion, as somebody who was a teacher for many years. We should not be too rigid, because that is the nature of teaching. I was qualified, but that did not necessarily guarantee that I was a brilliant teacher. I know that qualifications do not necessarily guarantee anything but, in an instance like this, it seems absolutely right that the people entrusted to carry out these powers have the appropriate qualifications for what are complicated, complex financial matters. I therefore support all three amendments, which I think are very important.

[Lord Palmer of Childs Hill (LD)]

My Lords, I am also pleased to express support for Amendments 68A, 68B and 68C, which collectively strengthen ministerial and parliamentary oversight of the powers exercised under the Bill by authorised officers on behalf of members of the Cabinet Office, as other noble Lords have said. Ensuring that robust oversight mechanisms are in place is essential to maintaining public confidence in how these significant powers are deployed. By enhancing scrutiny, these amendments help to guarantee that such powers are used appropriately and proportionately, reducing the risk of misuse or error.

Amendment 68C, which requires investigators to hold professional qualifications comparable to those of officers in the Department for Work and Pensions Fraud Investigation Service is particularly welcome. They need professional qualifications. This commitment to professionalism and expertise safeguards the integrity of investigations and reinforces trust in the system. From our perspective, it is crucial that those entrusted with such important responsibilities are properly trained and qualified, ensuring fairness and consistency in enforcement. Together, these amendments produce a more transparent—we always come back to transparency—accountable and professional framework for combating fraud within public authorities.

Let it see the light and, when it does, there is a way of controlling it. Too often, whoever are in government think they know best and ask, “Why do we have to make ourselves open to scrutiny?” But it is that scrutiny, that existence of light from beyond, that makes the legislation fit for purpose. I support these amendments.

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

My Lords, all the amendments in this group relate to Clause 66, which defines an authorised officer. It would be a fair assessment of the position of the noble Baroness, Lady Finn, that she does not trust that, in her words, “junior civil servants to use these powers appropriately”. I will reassure her and the Committee that, first, it is not seniority that is key; it is professionalism and experience. The PSFA has already committed to training its authorised officers, who will utilise powers as set out in Clause 66, and authorised investigators, who will use the PACE powers in Clause 7, to predefined standards as set out by the government counterfraud profession investigator standard guidelines. This will align the PSFA with those using similar powers in other government departments such as HMRC and the DWP.

The team at the PSFA are serious people. Current members of the PSFA’s enforcement unit include former police officers and civil servants who have worked in investigatory roles across a number of government departments. They have experience of conducting counterfraud investigations and bring with them a wealth of relevant experience, skills and knowledge. I was tempted to get all their CVs to read out, but I thought that that may prolong Committee a little.

First, the powers in Clause 7 can be used only by authorised investigators specifically authorised to use the PACE powers and not authorised officers. The amendment requiring that those powers can be exercised only as provided in Clause 66 would render Clause 7 unusable.

Secondly, although the Minister will delegate the operation of these powers to authorised officers, the Minister will retain accountability and strong oversight. There will, of course, be strong ministerial interest in the effective, safe and value-for-money use of these powers. Noble Lords will know that I cannot speak for all future Ministers, but the current Minister meets individually with the chief executive of the PSFA very regularly.

Thirdly, the proposed delegation of powers in this Bill to authorise officers follows precedent elsewhere, including in HMRC and the DWP.

Fourthly, the amendment also calls for records of decision-making. In criminal investigations, the PSFA is already bound by legal obligations to record decisions and will do so through a dedicated case management system and the internal review process. The PSFA will have similar processes for civil cases.

Finally, the powers in the Bill are subject to review by an independent person as specified under Clause 64, and will be subject to inspections by His Majesty’s Inspectorate of Constabulary and Fire & Rescue Services. Inspection reports will be publicly available and those by the independent person will be laid before Parliament.

I think it would be helpful if I gave some additional clarity on some issues raised by noble Lords. The Civil Service grade that an authorised officer would be required to hold has been a theme of some debate in your Lordships’ Committee, so I think some clarity will be helpful. The Bill does not stipulate a grade that an authorised officer needs to hold. The grade is less critical than the training they undertake. However, the PSFA anticipates that, in practice, all authorised officers will be of at least HEO grade. This is comparable to other organisations such as HMRC and the DWP. Clause 66 does, however, stipulate that a review must be conducted by an authorised officer at least one grade senior to the officer involved in the initial decision.

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Public money deserves high standards. We cannot afford to rely on voluntary best practice, opaque data and after-the-fact enforcement. The scale of the challenge, which this House has debated throughout the passage of the Bill, requires us to be proactive, not reactive. Amendment 68D offers a coherent and proportionate framework that would elevate fraud risk management across the public sector and equip both Parliament and the public with the information needed to track progress. I urge the Minister to consider it not as an imposition but as a strategic asset in helping us to achieve the outcome we all desire. I beg to move.

[Lord Palmer of Childs Hill (LD)]

My Lords, I warmly welcome Amendment 68D, which proposes a comprehensive and rigorous approach to fraud risk management for public authorities overseeing significant spending schemes. The amendment reflects a proactive commitment to safeguarding public funds by requiring authorities managing more than £100 million annually to register their schemes, conduct thorough fraud risk assessments and use robust methods to measure and report fraud. Such measures are vital to identifying vulnerabilities early and taking meaningful action to prevent loss, which aligns closely with my party’s values of transparency—which I keep coming back to—and responsible stewardship of public money.

Moreover, the role assigned to the Public Sector Fraud Authority in verifying fraud rates, publishing comparisons and enforcing corrective actions would introduce a much-needed layer of independent oversight and accountability. The requirement for independent audit and parliamentary scrutiny would further strengthen this framework in ensuring that these responsibilities are not only carried out diligently but openly reported and reviewed. The amendment offers a significant opportunity to improve fraud prevention at scale, protect taxpayers and build public trust in how government spending is managed.

I fully support this proposed step forward. I relate this to my time on Barnet London Borough Council, when I chaired the audit committee. The idea that audit can make things work better and that scrutiny and bringing things into the open will form better department management as well as better control of finances was the premise of the world I lived in when I chaired the committee for eight years. I therefore support the amendment proposed by the noble Baroness, Lady Finn.

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

My Lords, tackling public sector fraud is a foremost priority for this Government. Amendment 68D raises interesting points. It seeks to put some of the work that the PSFA does with departments and public bodies to improve their management of fraud on a statutory basis, and to explicitly have it cover all government schemes or programmes over £100 million.

While we have been debating the fraud investigation activities of the Public Sector Fraud Authority, for which we believe there is a very strong case, we have understandably not given as much time to the wider responsibilities the PSFA already holds, as detailed in its published mandate—which is wonderful bedtime reading, as per my theme; I like to give bedtime reading on each day in Committee. This is not part of the Bill, but it might be useful for noble Lords if I spend a moment to update the Committee on the other work of the PSFA.

The PSFA works with departments to improve their understanding of fraud and to improve their action on the risk of fraud through a range of modern techniques. Fraud investigation is, of course, only one part of this. Alongside this, public bodies need effective capabilities to understand and reduce the risk of fraud, through tools such as fraud risk assessment and fraud measurement, which this proposed amendment covers, and also through intelligence, fraud prevention, deterrence, process design, the use of data and analytics, fraud detection and the shaping of an organisation’s culture.

I would like to set out some key principles around how the Government approach fraud risk. Accounting officers within departments are responsible for managing public sector organisations’ risks, including fraud. Each organisation faces a range of fraud risks specific to its business, from internal and external sources. Managing Public Money—also a fascinating read—already sets out that, for any new major area of spend with high fraud risk, departments shall assess the risk of and impact from fraud at the outset. This identifies the potential for fraud and the different impacts that fraud could have for the spend area.

In high-risk areas, once spending is approved, this results in the development and continued maintenance of a detailed fraud risk assessment. High-risk areas would be the highest areas of government spending where fraud measurements are not yet in place and which have been identified as high risk by a mandatory initial fraud risk assessment process. The PSFA was introduced with a published mandate that openly sets out how it will work with departments and public bodies and what is expected of all parties. Government departments and public bodies must comply with this mandate. The mandate sets out that public bodies must use initial fraud impact assessments, in line with Managing Public Money, submit quarterly data returns on the levels of fraud and error they find and report on their progress against their action plans and key metrics.

Departments and public bodies are also required to ensure that they adhere to the counterfraud functional standard. This is independently assured by the Public Sector Fraud Authority on a rolling basis. The functional standard outlines the expectations for managing counterfraud, bribery and corruption activity. It clarifies the basics that public bodies should have in place, promoting efficient, coherent and consistent management across the public sector. The PSFA’s published mandate enables it to conduct expert reviews on public bodies’ fraud work. To date, the PSFA has reviewed 31 public bodies against the counterfraud functional standard. The PSFA’s mandate also requires it to publish a report on fraud across government annually. This includes the levels of detected fraud and corruption and associated error in departments and public bodies—excluding tax and welfare, as these are published elsewhere. Fraud measurement exercises are used as a tool to understand fraud risk in the highest areas of loss.

The Government have also created a high fraud risk portfolio, in line with the PSFA’s mandate, that details the highest risk areas of government spending where there are not yet fraud measurements in place. The Government decided that schemes on this portfolio should undertake fraud measurement exercises and report these to the centre. This is currently being tested with the current schemes on the portfolio, where it is operating on a “comply or explain” model, enabling us to assess the burden and impact of this approach. The PSFA will continue encouraging and supporting departments to do more targeted measurement. Just last year, the government counterfraud profession launched its first qualification for fraud measurement practitioners.

The amendment also recommends that all the findings are reported to the National Audit Office, in the form of the Comptroller and Auditor General. The PSFA’s mandate already enables the PSFA and the NAO to work very closely to share information on public body performance in dealing with fraud:

“The PSFA will openly and regularly update on its activities and the data it holds to the National Audit Office (NAO). This will include performance data and the compliance with mandatory processes and data requests”.


In addition, this is an area that the Public Accounts Committee has paid keen attention to, and the PSFA has committed to share the high fraud risk portfolio with the committee on reading-room terms.

I hope that the collective measures I have outlined reassure noble Lords that the Amendment 68D would serve only to replicate responsibilities and duties that already exist and that the noble Baroness will therefore withdraw the amendment.

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[Lord Davies of Brixton (Lab)]

My Lords, my noble friend Lord Sikka very much regrets not being here today, for totally understandable personal reasons.

[Lord Palmer of Childs Hill (LD)]

That matter is not in this group.

[Lord Davies of Brixton (Lab)]

Could the noble Lord wait, please?

As the noble Lord has reminded me, my noble friend’s amendments are in the next group. My noble friend Lord Sikka will not be here and the lead amendment will not be moved; however, the issues raised in those amendments are directly relevant to this group. In order for us obtain further clarification, it would be helpful to the Committee if my noble friend the Minister could, in our discussion on this group, give a broad indication of the response that would have been made to the following group so that those Members who are interested can consider what has been said and take a view on whether the specific issues that would be raised in the next group, but are germane to this group, should be raised on Report. I think that it would be helpful to have the matter that would be raised in the following group clarified in answer to this group because, to be honest, they totally overlap.

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Following on from what the noble Baroness, Lady Finn, said on Amendments 74C and 74D, I have a genuine question for clarification about the Minister delegating functions. I hope that the Minister will be able to confirm that the Government will ensure that none of these functions will ever be delegated to an outside agency. I am thinking of the issues of consultants and outsourcing that have brought so much government action into disrepute, and the companies that have had real issues in terms of the way they have behaved in delivering public contracts. We know that a handful of companies deliver most of the large government contracts. I hope that the Minister will confirm that this will never be outsourced, because that would be deeply problematic. Perhaps the amendment tabled by the noble Baroness, Lady Finn, would address that issue.

[Lord Palmer of Childs Hill (LD)]

My Lords, I am pleased to support these amendments, which, once again, seek to enhance the independence, transparency and accountability of the Public Sector Fraud Authority. By probing the Government’s openness to specifying that both the chair and the non-executive members of the authority should be independent—whatever that means—Amendments 68E and 68F reinforce my party’s commitment to ensuring that public bodies operate free from undue political influence. Independence at these levels is crucial for maintaining public trust and guaranteeing impartial oversight of fraud prevention and recovery efforts.

Furthermore, Amendments 69A and 71A, which seek to clarify and limit ministerial powers around appointments and eligibility criteria, would strengthen the governance framework of the authority, promoting fairness and transparency in its leadership. The requirements in Amendments 74A and 74B for timely publication of annual reports and controls on authorising authentication would help to ensure openness and proper organisational integrity.

Finally, Amendments 74C and 74D would confirm that the Minister retains responsibility for functions even when extended to the authority, which would balance operational independence with necessary political accountability. Collectively, these amendments embody my party’s values of good governance and robust oversight, which are essential to protecting public funds and enhancing the effectiveness of fraud prevention. I heartily support these amendments as part of the transparency to which we are committed.

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

My Lords, I thank noble Lords for raising the important issues of independence, recruitment, reporting and powers should the PSFA become a statutory body. The purpose of creating a statutory body is to place individual enforcement decisions at arm’s length from Ministers, but we have been clear that, while the PSFA enforcement unit is small, creating a new statutory body is not proportionate, so the Government will not commence Schedule 2 in the immediate future.

The approach in Schedule 2 adheres to published guidance in the Public Bodies Handbook. It follows the same approach used elsewhere, such as Schedule 1 to the Victims and Prisoners Act, which established the Infected Blood Compensation Authority. Amendments 68E and 68F seek to insert “independent” before the description of the chair and non-executive directors. These are ministerial appointments, but I remind your Lordships that the Government have been clear that, should the PSFA be established as a statutory body, its enforcement decisions would be fully independent of the Minister. To ensure this, the chair and non-executives will be public appointments and will follow the Cabinet Office Governance Code on Public Appointments, which is overseen by the Commissioner for Public Appointments. This will ensure that their recruitment is transparent and includes an independent member on the recruitment panel. This is similar in approach to the Infected Blood Compensation Authority, which uses the same legislative language. Amendment 69B seeks to insert words to a similar effect in respect of the chair appointing the chief executive and executive board members, so it is linked to these amendments.

In respect of Amendments 71A and 74B, which seek to remove the Minister’s power to make regulations on the eligibility rules for members of the PSFA and to prevent the PSFA from authorising a person who is not a board member of the authority authenticating its seal, it is important to note these are common provisions in the creation of public bodies. The seal is the means by which the PSFA will be able to enter into deeds and contracts, such as leasing property, and authenticating the seal just means signing next to it to show that the deed has been approved. Although authentication would usually be done by a board member of the PSFA, we have built in a degree of flexibility so that it can be delegated, for instance to its legal officers, should the need arise. As noted, the Infected Blood Compensation Authority and other public bodies such as the independent monitoring authority, established in the European Union (Withdrawal Agreement) Act 2020, have similar provisions. They serve to improve the efficacy and administrative efficiency of such public bodies.

As to Amendments 74C and 74D, which would see the Minister retain responsibility for the exercise of functions in the Act after they have been extended to the PSFA, and Amendment 69A, which would make the chief executive and other executive members’ ministerial appointments, I refer your Lordships to my earlier point. One essential reason in setting up the PSFA as a statutory body would be to remove any perception of potential political interference. These amendments would be counter to that policy intention.

Finally, Amendment 74A would require the PSFA to publish its annual report within three months of the end of the financial year. The Bill currently stipulates, in paragraph 12 of Schedule 2, that this should be as soon as reasonably practicable after the end of each financial year. That is for good reason. The accounts will need to be reviewed by the Comptroller and Auditor-General, whom we would then need to commit to this timeline. Additionally, Erskine May, our own guidance on reporting, notes that accounts, together with an NAO report, must be laid no later than the following January. A statutory PSFA would follow Erskine May, as well as His Majesty’s Treasury’s guidance on Managing Public Money and the annual Government Financial Reporting Manual, to ensure that its report follows best practice.

I turn to the specifics of the points that have been touched on. The noble Baroness, Lady Finn, asked why eligibility regulations under paragraph 6(1) of Section 2 are useful. The ability for a Minister to lay eligibility regulations in respect of a board’s membership is a common feature in setting up public bodies. They can be used, for example, to safeguard independence, ensure expertise at its inception, or improve public trust by excluding certain individuals or demanding certain attributes. Examples might include barriers against those who are currently politically active, or have conflicts of interest or criminal convictions.

With regard to powers being exercised on a Minister’s behalf and safeguarding, there are numerous safeguards built into the Bill, such as independent oversight of all the provisions by external bodies. There are also obligations to obtain the permission of the courts for debt recovery and rights of appeal to the First-tier Tribunal. Furthermore, authorised officers will be civil servants, obliged to follow the Civil Service Code, which requires that they act solely according to the merits of the case.

In response to my noble friend Lord Davies, I am more than happy, especially given the circumstances with our noble friend Lord Sikka, to write to him with all the points of the speech I would have responded with, and I am happy to share that with all Members of the Committee—that pertains to group 9.

I take the opportunity to reassure the noble Baroness, Lady Bennett. Will any roles be outsourced? No—we are clear that they have to be authorised officers as defined in Clause 66: they have to be civil servants.

I hope that, with those reassurances, noble Lords will not press their amendments and we can move forward to the next group.

Public Authorities (Fraud, Error and Recovery) Bill

Lord Palmer of Childs Hill Excerpts

Committee stage
Monday 16th June 2025 Grand Committee

[Baroness Bennett of Manor Castle (GP)]

My Lords, it is a pleasure briefly to follow the noble Lord, Lord Vaux, who made a typically powerful case. I echo his comments, particularly on the need for safeguards on the face of the Bill. We need only look across the Atlantic to see how badly things can go wrong and how important it is that there are laws on which future Governments—I am not at all referring to this Government—can be held to account.

I support all the amendments in this group, but I will focus particularly on Amendment 79, in the name of the noble Lord, Lord Sikka, which would insert:

“A copy of the information notice must be sent to the parties affected by the notice”.


In considering that amendment, I looked at reports today from the horrific case of Nicola Green, the mother of a teenager with cerebral palsy, who was pursued by the DWP for more than a year, having been accused of fraudulently claiming nearly £3,000 in carer’s allowance. The DWP—this is the point of the story that is relevant to this amendment—wrote to her employer without her knowledge to try to take money from the pay of this part-time college worker who works less than 14 hours a week. That is a demonstration of how people need awareness so that they can know what is going on. To finish the story of Ms Green, last month the tribunal judge ruled in her favour and said that she had done absolutely nothing wrong. The DWP did not attend the hearing and then said that it was planning to appeal against the judge’s ruling. A few days ago, the Guardian got involved and Ms Green has now been told that she will not be pursued and she will receive information on how she can claim for compensation.

That is one case, but what we are looking at here is when a case is getting started, if we assume that there are reasonable grounds, as the noble Lord, Lord Vaux, has outlined should be put on the face of the Bill. If the DWP asks for this information and it has got something horribly wrong and has misunderstood the whole situation, as we know happens all too often, the claimant who knows about the information request will be in a position—hopefully, without going through the year of turmoil that poor Ms Green has gone through—to be able to stop the matter at that point.

Amendment 79 is, therefore, a terribly important amendment. I hope that we might hear from the Minister an ironclad, watertight statement that this will happen anyway, but if that is not what we hear, I will encourage the noble Lord, Lord Sikka, to bring the amendment back on Report, because it is an absolutely crucial issue.

[Lord Palmer of Childs Hill (LD)]

My Lords, these amendments in the names of the noble Lords, Lord Sikka and Lord Vaux, on the information-gathering powers of the DWP, provide greater clarity and safeguards regarding the collection and consequences of information requests under the Bill.

Amendments 76 and 78 both address liability and aim clearly to establish which party is responsible for any consequences arising from the provision of incorrect information. This clarification will, I hope, be important in ensuring that all parties understand their responsibilities and the potential implications of their actions, thereby promoting fairness and reducing uncertainty.

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Debate on whether Clause 74 should stand part of the Bill.

[Lord Palmer of Childs Hill (LD)]

My Lords, I give my wholehearted support to the stand part notices in the name of my noble friend Lady Kramer who, as noble Lords might gather, is in the Chamber for the Employment Rights Bill—I should perhaps also be there, but that is why noble Lords have me and not my noble friend Lady Kramer.

The opposition to Clause 74 and Schedule 3 standing part of the Bill is both principled and pragmatic, and would ensure that the Public Authorities (Fraud, Error and Recovery) Bill strikes the right balance between combating fraud and protecting the rights and dignity of individuals. The removal of the requirement for banks to examine claimants’ bank accounts, proposed in both Clause 74 and Schedule 3, would restore a vital safeguard for personal privacy and prevent an unnecessary intrusion into the lives of those who rely on public support. This approach would uphold commitments to civil liberties, ensuring that anti-fraud measures do not come at the expense of fundamental rights, as mentioned by the noble Lord, Lord Sikka, on the previous group. I commend my noble friend Lady Kramer’s leadership in recognising that the fight against fraud must never become a pretext for overreach and unwarranted surveillance.

Equally, Amendments 79B and 80, supported by my noble friend Lady Kramer and others, would wisely align eligibility verification safeguards with those already established for suspected fraud and, crucially, would limit the use of such powers to cases where there is genuine suspicion of wrongdoing. These changes will prevent fishing expeditions—I am sure that there will be fishing expeditions—and protect innocent welfare recipients from undue scrutiny.

My own Amendment 89 to Schedule 3 would ensure that the Bill applies only to the benefits explicitly listed and would further clarify and limit the scope of these powers, which could be pretty heavy, providing certainty and reassurance to the public. Together, these amendments would strengthen the Bill, making it more proportionate, transparent and just. I urge your Lordships to support this package, which embodies the best traditions of parliamentary scrutiny and my party’s belief in both fairness and effective government.

[Lord Vaux of Harrowden (CB)]

My Lords, I speak to my Amendment 79B and thank the noble Baroness, Lady Kramer, for her support for it. It is a very simple amendment that would make the giving of an eligibility verification notice subject to the same safeguard that already applies to all the other information-gathering powers within the Bill—namely, that the Secretary of State must be satisfied that issuing an EVN is necessary and proportionate for the purpose for which it is issued.

The Minister will no doubt have noticed that I have taken the liberty of inserting “reasonably” into the amendment, as we have just been discussing. Otherwise, the wording is aligned with the safeguard in Clause 3(1)(a), in relation to the Cabinet Office Minister requiring information, and to the wording in Clause 72, in relation to the Secretary of State for the DWP requiring information about suspected fraud under new Section 109BZB(1)(b). This safeguard applies everywhere in the Bill whenever the required information relates to suspected fraud. Rather strangely, however, it does not appear in Schedule 3, where there is no suspicion. That seems the wrong way round. Surely it is even more important that the giving of an information notice should be necessary and proportionate in cases where there is no suspicion.

I am assuming that this omission is in fact an oversight and that, given that it appears everywhere else in the Bill, the Minister will simply accept it. If not, she will need to explain why the exercise of these important and intrusive suspicionless information-gathering powers should not have to be, at the very least, necessary and proportionate in the same way as the exercise of the other information-gathering powers have to be. I will take a little bit of convincing, I am afraid.

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[Baroness Sherlock (Lab)]

In as much as we will say to the banks that we would like them to look at the accounts into which we pay benefits and will give them the reference numbers. Clearly, it is up to the banks how they identify those. I think it unlikely that they will take each bank account, look at it individually and make a decision, but it is up to them. We simply want them to look at those bank accounts and to tell us whether, within those bank accounts, they believe that the particular eligibility indicator that we have given them is correct.

Regarding frequency, we will negotiate that with the banks. The previous Government looked at an earlier iteration of this and ran two proofs of concept to establish that it would work and be effective. We now have to take the powers in order to be able to start doing this. So, we have agreed that we will work with a small number of banks and work out bit-by-bit how this works, bring over information as we can manage it, make sure that the system works, and build up as we go. We will determine from that how often we will need to do that and how it works. That has to be determined; we could not determine that in advance because we need the powers in the Bill to be able to start the process.

In response to the noble Baroness, Lady Fox, it is a question of proportionality. Clearly, we already ask the Revenue to tell us how much people earn in order to determine whether or not they meet the earnings criteria for, for example, universal credit. We could simply allow people to tell us, but when we did that, some of them got it wrong; many of them made mistakes; sometimes it changed, and sometimes they deliberately did not tell us. So now, we simply get information directly from the Revenue.

We think that the power is proportionate. Whenever someone compares it to something that feels disproportionate, such as spying or putting bugs in everyone’s houses, I think that we can either claim that this is a mass surveillance power like China would use and then wonder why people are getting paranoid about it, or, while I do my best to be specific about what we are trying to do, we can all try to have a measured conversation about whether or not it is reasonable, while fully accepting that for some people the line will be in a different place than for others for reasons of both philosophy and proportionality. I fully accept that.

I have done the best I can in 25 minutes. On that basis, I urge noble Lords to agree that the clause stand part.

[Lord Palmer of Childs Hill (LD)]

My Lords, I thank the Minister for that tour de force. I am afraid the problem is that we all have different ideas about what is proportionate. From what I have heard, I do not think what the Government are suggesting is proportionate, and that is where the problem arises. I come from the feeling that there is a presumption of innocence, and this seems to me almost a presumption of guilt.

The Minister has not taken the point about the nervousness of banks. If a bank gets even a modest inquiry—anyone who has a bank account knows that this happens if there is a certain inquiry on your bank account—signs go up in the algorithm used by the bank saying, “We’ve got to look at this”. Anyone who is a Peer or an MP knows that their affairs can be looked at more closely just for that very reason. I hope that, on Report, we can deal in greater detail with how nervous the banks will be about what is proposed. I hope the Minister can come back and give us reassurance from real banks—joint-stock banks—that have said how they view this. I think they will view it wanting to be on the safe side.

However, at this stage, I will not press my noble friend Lady Kramer’s clause stand part notice.

Clause 74 agreed.

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[Baroness Fox of Buckley (Non-Afl)]

My Lords, there was extensive conversation about the role of banks in the debate on a previous day in Committee, and I probably got carried away with my own hyperbole when I said that they were being coerced into being involved, on which the noble Baroness, Lady Anderson, corrected me. However, I think we can say that they are compelled to be involved and that financial penalties, which will become increasingly punitive, will be levied if they do not do as the Government request. If they get those penalties, the cost might not be an issue but there would certainly be reputational damage. We need to have some context here and recognise that the banks are not queuing up to do this. That is an important point, which the noble Lord, Lord Davies of Brixton, has made. There is a reluctance about some of the things that are happening with the Bill, which I think the Government can admit to.

In all the literature they have produced and in conversations we have had so far, the Government have reassured those of us who are worried about privacy. We are constantly being reassured that there are limitations on the type of data the banks will share. On the other hand, the way in which the Government are dealing with that is by saying that the banks will be fined—there will be a penalty—if they overshare or if they provide inaccurate information, so I fear that this penalty will, again, have the impact of pushing the blame or responsibility on to banks for any errors.

That makes me nervous, because it is not clear to me how they will not see anyone on benefits as just a pain in the neck for them, since they will now have to go through the exercise of checking, which they are being compelled to do or they will be fined or get into trouble, and if they get the information wrong or hand over the wrong information, they can be fined again. Inevitably—this is why I am interested in these amendments—the banks will associate these eligibility verification notices and the work being asked of them for those on benefits, and they will view such people as creating more work and more jeopardy.

I also think the banks are being held responsible for things they should not necessarily be responsible for. I would be interested to know how the Minister feels, because I think it is a reasonable query at this point to ask, “Isn’t there a problem with private banks being asked to be government inspectors?” I think it was one of the MPs who said that the purpose of banks is not to act as an arm of the state. How should private banks respond to the fact that the state is asking them to do a huge amount more in relation to this clamp-down on DWP welfare fraud? It seems to me that, ultimately, we are asking the banks to do what the Government should be doing, and the banks will get the blame if things go wrong. They are the ones who will be doing the surveillance, no matter which way we look at it.

[Lord Palmer of Childs Hill (LD)]

My Lords, I warmly welcome the spirit and substance of these amendments, which would collectively strengthen the Public Authorities (Fraud, Error and Recovery) Bill by ensuring that our approach to tackling fraud is not only effective but fair and—that word again—proportionate.

Amendment 81 from the noble Lord, Lord Vaux of Harrowden, rightly probes how the Secretary of State will prevent undue costs being imposed on banks and seeks to clarify the mechanisms for cost recovery. This, I believe, is an essential safeguard, ensuring that our financial sector partners are not overburdened by compliance costs, which could ultimately impact customers and the wider economy.

Similarly, Amendment 91, which calls for an independent review of the eligibility verification powers with a focus on the proportionality—that word again—of costs incurred by both the department and banks, is a welcome step towards transparency and accountability in the implementation of these new powers.

I am particularly supportive of Amendment 83, which would place the duty of care that financial services providers owe to their customers at the forefront, ensuring that data sharing with the DWP does not override these fundamental responsibilities. This is a crucial point. While we must be resolute in our effort to combat fraud—on which I am sure we all agree—we must not do so at the expense of the trust and the rights of individuals. It is a very fine line to draw.

Amendment 89C from the noble Lord, Lord Vaux, would remove the risk that the mere existence of an eligibility indicator could trigger unnecessary action against account holders, thereby preventing unintended harm to individuals.

Taken together, these amendments would ensure that the Bill’s powers are exercised with restraint and with full regard to the interests of both institutions and individuals. We must not let it trigger unnecessary actions against account holders under the Proceeds of Crime Act. I support these amendments in their entirety.

[Viscount Younger of Leckie (Con)]

My Lords, I speak in support of Amendments 81 and 91 in the name of the noble Lord, Lord Vaux, which seek to introduce proportionate and principled safeguards into the operation of eligibility verification notices: namely, that the Secretary of State must first be satisfied that the costs to the person receiving the notice are reasonable and proportionate, or else agree to reimburse those costs in whole or in part, and that this be subjected to an independent review. This is not a marginal or administrative detail; it goes to the heart of how we structure and sustain effective partnerships between the Government and the private sector, and particularly to how we treat the banking sector as a key actor in the fight against public sector fraud.

Throughout our deliberations on the Bill, my noble friend Lady Finn and I have returned time and again to the importance of ensuring that the powers are exercised responsibly, with due regard to proportionality and fairness. This amendment is a natural extension of that principle. It recognises that, when we ask third parties—in this case, banks and financial institutions—to support fraud detection by responding to eligibility verification notices, we are asking them to divert time, resources and personnel to do so. This of course comes at a cost, and it is only right that these costs are acknowledged and handled fairly.

As has been said, the banking sector plays an essential role in supporting government anti-fraud objectives. Banks will help to identify irregularities, flag risks and support enforcement action. But if we want this co-operation to continue and to deepen, we must treat banks as strategic partners, not simply as tools to be leveraged without regard to impact. This amendment would ensure that we are not shifting the financial burden of fraud prevention on to the shoulders of institutions that are neither the source of the fraud nor the primary beneficiaries of its reduction. It would also introduce a basic but important fairness test, that if costs are disproportionate, they should be recognised and potentially reimbursed.

Given the scale and frequency with which these powers may be used under the new framework, we should recognise that banks may be required to undertake substantial internal data searches, compliance checks or system queries, potentially at short notice. As the noble Baroness, Lady Fox, pointed out in her excellent remarks, to do so effectively, banks will need to allocate skilled staff and technological resources. It is only reasonable that we ensure that such work is feasible and fairly compensated where appropriate. Furthermore, the precise detail on how this mechanism will work is still vague from the Government.

I shall not mention flow charts again, for fear of being shouted down, but maybe we need a spreadsheet—although perhaps I shall be shouted down on that basis. Can the Minister give some detail as to how the “test and learn” with the banks is going as regards the operability of the system? In particular, what are the anticipated costs to the banks? It is understandable that the Government may not be able to answer this, as they may say that it will depend on the number of potential cases emerging and issues emanating for each case, which will vary. However, I would imagine—and I think that I said this at Second Reading—that the ongoing test-and-learn process will be able to highlight an average per case cost. If there is no information available, how do we know that the costs are not astronomical or even unsustainable for the system established? I hope that the Minister can enlighten us on that.

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[Lord Verdirame (Non-Afl)]

My Lords, I will be very brief. I very strongly support everything that the noble Lord, Lord Vaux, has said on these two amendments. They are some of the most important amendments that have been debated today because they go to a very fundamental principle. The power in Clause 72, with the new Section 109BZB, is quite significant, and we need to have limits to the exercise of this power in the Bill, both as regards the reasonable grounds—that is Amendment 84—and as regards the human decision-maker. I will not repeat the noble Lord’s reasons because I thought he put his case so compellingly, but I am very much in favour.

[Lord Palmer of Childs Hill (LD)]

My Lords, I am also pleased to welcome Amendments 84 and 85, tabled by the noble Lord, Lord Vaux of Harrowden, which serve to strengthen the safeguards within the Bill.

Amendment 84 would ensure that an authorised person must have more than just the existence of an eligibility indicator before embarking on more intrusive investigations. We believe this is a vital protection against overreach, ensuring that individuals are not subjected to unnecessary or disproportionate scrutiny based on limited evidence. Such a safeguard is entirely in keeping with my party’s principles of fairness and proportionality—that word again—and it will help to maintain public confidence in the system by ensuring that investigations are always grounded in robust evidence.

Amendment 85, which requires that information received following an eligibility verification notice is reviewed by an appropriately senior person before any changes to benefits or intrusive investigations are commenced, is equally welcome. This amendment introduces an important layer of oversight and accountability, ensuring that decisions with potentially significant consequences for individuals are not taken lightly or without proper consideration. By embedding these checks and balances into the Bill, we would be not only protecting the rights of claimants but upholding the integrity of our counterfraud efforts. I confirm other comments about how important these amendments are, and I hope that we can carry them forward to Report if need be.

[Viscount Younger of Leckie (Con)]

My Lords, I rise to speak in support of speak in support of Amendments 84 and 85 in the name of the noble Lord, Lord Vaux of Harrowden. These are thoughtful, proportionate and necessary additions to this schedule, and they speak directly to the themes that we on these Benches, and many across the Committee, have consistently returned to throughout Committee: clarity, fairness and safeguards for the individual in the exercise of significant state powers.

Amendment 84 seeks to ensure that the mere presence of an eligibility indicator is not, in and of itself, treated as constituting reasonable grounds for suspicion, as required under new Section 109BZB(l)(a) of the Social Security Administration Act 1992, before certain investigatory powers can be triggered. This is of fundamental importance. The Bill proposes a system whereby data provided by financial institutions, under an EVN, may trigger further investigatory steps. But what is an eligibility indicator? It is, in essence, a flag: a signal generated through algorithmic or rule-based analysis that a particular feature of a person’s financial behaviour may be anomalous or potentially inconsistent with benefit entitlement.

As I have said before, we must be absolutely clear: an eligibility indicator is not a finding of fact. It is not, in itself, evidence of wrongdoing. Amendment 84 simply ensures that the existence of a flag must be the beginning of a process and not the end of one; that further evidence or analysis must be applied before escalation; that human judgment must play a role, as has been mentioned today; and that when the state exercises its powers, especially when those powers touch on privacy, dignity or the right to subsistence, it does so on the basis of reasonable grounds. This is a proportionate safeguard. It respects the need to act on suspicious patterns, but it also respects the rights of the individual and the integrity of the system.

Amendment 85 builds on this principle by adding an additional layer of oversight—namely, that any action to suspend or amend a person’s benefits or to initiate intrusive investigatory steps must first be reviewed by a person of appropriate seniority and experience, authorised by the Secretary of State. Again, this is not an attempt to frustrate or delay the enforcement regime—it is a recognition that decisions on subsistence-level support must be taken with proper scrutiny by individuals equipped with the training, authority and awareness to make such decisions with the necessary care.

We must also remember that these are not abstract powers. They affect real and often vulnerable people, whose entire financial well-being may rest on the outcome of these decisions. A mistaken suspension of benefits, based on an unreviewed flag or misinterpreted data, can mean missed rent, no food on the table or the spiral into debt and instability. Also, it is possible that, if the system did not work as intended, individuals who suffered wrongful financial detriment—or, worse, reputational detriment—could take legal action.

If we are to maintain public trust in these powers, it is vital that there is confidence in not only their lawfulness but their soundness. A requirement that an appropriately senior official reviews and signs off on such actions is not a high bar. It is, in many ways, the least that we should expect of a responsible and accountable system. Can the Minister confirm, as she did the other day in respect of the Cabinet Office debates, the exact level of an appropriately senior official?

I should add that this chimes with remarks I made in our debate on a previous group about the need to have a so-called four eyes principle of oversight by a human being on decisions made—a fail-safe system for the monitoring of decision-making. The noble Lord, Lord Vaux, outlined the arguments in this respect very well. Together, these amendments would provide what so many across the Committee have called for: safeguards that ensure that the system operates justly as well as efficiently. They would not remove powers or obstruct action. They would embed standards of evidence, scrutiny and accountability into the decision-making process—standards that we would demand in any area of public life where the stakes are this high.

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Finally, when somebody is not considered capable of maintaining a bank account, they can grant power of attorney to somebody to manage a bank account for them. Does this provision mean that the person who exercises the power of attorney will now come under scrutiny, or that their bank account will come under scrutiny? Perhaps it will not—it is something that I have looked for in the Bill, but I have not been able to find any information in the Bill or in the accompanying Explanatory Notes. I beg to move.

[Lord Palmer of Childs Hill (LD)]

My Lords, I welcome Amendments 89A and 89B, tabled by the noble Lord, Lord Sikka, which seek to ensure that the Department for Work and Pensions eligibility verification powers are restricted solely to bank accounts held in the name of the benefit claimant. The noble Lord, Lord Sikka, said a lot about this, and I agreed with it. These amendments are a measured and proportionate response to concerns about the scope of data-gathering under the Bill. By limiting DWP powers in this way, we would provide vital reassurance to claimants and their families that only their own accounts, not those of partners, relatives or unrelated third parties, will be subject to scrutiny. This approach would uphold the important principle of privacy and ensures that the fight against fraud does not inadvertently cast too wide a net, potentially impacting innocent individuals.

Further, these amendments would reinforce the Bill’s existing safeguards, which already stipulate that eligibility verification notices may be issued only for the purpose of identifying incorrect payments of relevant benefits and only in relation to accounts in receipt of specified benefits. By making it explicit that only the claimant’s own accounts can be examined, we would strengthen public trust in the system and demonstrate our commitment to fair and proportionate use of government powers.

So many people have joint accounts and accounts with more than two names on them, and I am not sure what would happen in those circumstances. You can see that, when Tom Bloggs or Sarah Bloggs have an account, there may be a reason to look at them—but if it is held by Sarah Bloggs and Tom Jones, what happens then? There is a danger here that people will be brought into the net, because accounts held in several names are very common, and I am not reassured from what I have read that they will not be dragged in in some way. I support the amendments from the noble Lord, Lord Sikka, in this case.

[Viscount Younger of Leckie (Con)]

My Lords, I shall speak briefly to this group. For once I shall be helpful to the Government, as I rise to speak in opposition to Amendments 89A and 89B in the name of the noble Lord, Lord Sikka.

These amendments would limit the scope of Department for Work and Pensions eligibility verification powers, as we see it, so that they apply only to bank accounts held solely in the name of the benefit recipient, including joint accounts from scrutiny. I recognise the intention behind this proposal, which is to protect privacy and the financial autonomy of those sharing bank accounts with benefit claimants—the noble Lord, Lord Sikka, very eloquently set out his stall—but I respectfully argue that the amendments would create a significant and problematic loophole in the integrity of the fraud and error detection system.

Let us be clear: if these amendments were adopted, a person under investigation for suspected misrepresentation of assets or income could very easily shield those resources simply by transferring them into a joint account, potentially with a spouse, relative, or even a third party. Under the proposed wording, such an account would then fall outside the reach of the DWP’s verification powers, regardless of whether the claimant retained full control over the funds or continued to benefit from them. Perhaps the Minister can help me and the Committee in understanding how the DWP test-and-learn mechanism might have highlighted such an issue, and how it might have provided such a solution.

This is not a theoretical risk. We know from operational experience that individuals engaged in fraudulent activity will often use exactly such mechanisms to conceal income or capital. The ability to move money to a joint account is a clear weakness that could be exploited by those who—we must remember—are believed to have stolen money from the taxpayer.

Under the current drafting of the Bill, the Government rightly allow verification of accounts held by or accessible to the claimant, including joint accounts. This does not mean that third parties will have their data or finances indiscriminately accessed. There are safeguards in place. The department will not be able to view or interfere with every joint account at will, only those, as the Minister indicated earlier, where eligibility indicators suggest a relevant connection, and only where necessary to verify benefit entitlement. These powers are proportionate and targeted.

The amendments, however, would tie the hands of investigators, even where there is a clear and compelling reason to examine whether the claimant has access to or control over funds that affect their entitlement. In so doing, they would introduce a gaping loophole in the very process that is meant to protect taxpayer money and ensure fairness across the system. Let us not forget the public interest at stake here. We are talking about a welfare system that supports millions of people, but also one that must command public confidence and demonstrate that it is both compassionate and resilient to abuse. Creating a known and easily exploited blind spot, as these amendments would, risks undermining that confidence and inviting avoidable losses to fraud or error.

Moreover, this is not a question of criminalising or persecuting people who live with others or hold joint accounts for legitimate reasons. It is about ensuring that where state funds are being claimed on the basis of need, the system has a fair and proportionate—to use that word again—ability to verify the facts, including the assets and income to which the claimant may have access.

No one benefits from a system where loopholes are left open, least of all the people whom the welfare state exists to support. These amendments may be well intentioned, as I said earlier, but they would weaken the ability of the department to carry out its responsibilities effectively, and in doing so would undermine both the fairness and sustainability of the benefits system. I therefore urge noble Lords not to support these amendments. Let us uphold the principle that verification powers should be robust, proportionate and resistant to manipulation—and not inadvertently create a rule that the dishonest can use to their advantage.

Finally, I feel that I might have written a speech for the Minister, but I am sure that she will tell me that I am completely wrong and, perhaps, rebut some of my points.

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[Lord Vaux of Harrowden (CB)]

My Lords, I will speak to Amendments 91A and 91B in my name in the group, and I thank the noble Baroness, Lady Kramer, for her support in this.

As the noble Lord, Lord Sikka, just said, these two amendments are designed to expand the scope of the independent review and the powers of the independent reviewer. I was very pleased to see the introduction of an independent review around the EVN powers; it adds an important safeguard. But as drafted, the scope of the review is quite limited, covering only whether the exercise of the powers has complied with Schedule 3B and with the code of practice, and whether it has been effective in identifying or assisting in identifying incorrect payments. It does not cover any of the other impacts that the exercise of the powers might have beyond that; we talked in the previous group about the costs, for example.

We have previously discussed and raised concerns about the effects that the Bill could have on vulnerable people, so I will not repeat those again—we have had quite a lot of debates around it. However, the possibility of those impacts on vulnerable people is both real and important, so it should be considered once those powers are in force, and, frankly, the obvious place for that is the independent review. So Amendment 91A would simply add an assessment of the impact on vulnerable persons to the scope of the independent review.

Amendment 91B is about the powers of the independent reviewer to obtain information. As it stands at the moment, they have no information-gathering powers. All the Bill says is that the Secretary of State “may” disclose information to the independent reviewer, and that is not good enough. For the independent review to be meaningful, the reviewer must have the legal ability to obtain all the information that he or she considers necessary to carry out the review. That is what Amendment 91 attempts to achieve: to allow the independent reviewer to request whatever they feel necessary to carry out the review, and to put a requirement for the Secretary of State to disclose what is requested. I rather hope that neither of those is particularly controversial as amendments go.

Just generally, I should say that these are the last amendments that I have tabled, which may relieve the Minister, so I just wanted to say that I hope that she accepts the spirit in which all of them have been put forward. I accept that the Bill is much less concerning than its predecessor was, and I hope that she sees the amendments as generally constructive, aimed primarily at ensuring that the safeguards against misuse of these powers are both robust and, importantly, permanent. I will be very happy to meet with her between now and Report to see whether we can find common ground on some of them.

[Lord Palmer of Childs Hill (LD)]

My Lords, it is another sort of spirit that I want at the moment.

I am pleased to welcome these thoughtful amendments, which significantly enhance the transparency, accountability and fairness of the Bill. Amendment 90 from the noble Lord, Lord Sikka, seeks to ensure that the voices and experiences of benefit recipients are taken into account in any independent review of eligibility verification measures. This is a vital step in building trust and legitimacy for these new powers, ensuring that those most affected have a say in how the system is reviewed and improved. Listening to recipients will provide invaluable insights, helping to identify unintended consequences and ensuring that the system remains responsive and humane.

Similarly, Amendments 91A and 91B are tabled by the noble Lord, Lord Vaux of Harrowden, and my noble friend Lady Kramer, who is busy in the Chamber on the Employment Rights Bill, where I should have been. These are crucial safeguards. Amendment 91A requires that the independent review specifically considers the impact of eligibility verification on vulnerable persons, ensuring that our most at-risk citizens are not overlooked or disproportionately affected. Amendment 91B strengthens the review process by obliging the Secretary of State to disclose all information reasonably requested by the independent reviewer rather than leaving disclosure to ministerial discretion. These changes will create a more vigorous and effective oversight regime, fostering public confidence that the powers are being exercised justly and transparently. I support these amendments.

[Viscount Younger of Leckie (Con)]

My Lords, in speaking for the Opposition, I should say that there is quite a bit to say, but I have cut down my remarks in the interests of time. I think the Committee will be pleased to hear that.

I regret that once again I oppose an amendment by the noble Lord, Lord Sikka, whose proposed change to Clause 75 seeks to replace the appointment of an independent person with that of a

“panel, at least 50% of which is … elected by recipients of the benefits in question”.

Although I understand the sentiment behind this proposal—namely, to ensure that the voices of benefit recipients are heard in the process of oversight—I respectfully submit that this amendment is not the right way to achieve that goal. It is very democratic in spirit but unworkable.

I will begin with the practicalities. This amendment, if accepted, would introduce a highly complex, costly and poorly defined mechanism for oversight. The idea of electing panel members from among benefits recipients across all forms of social security is, on the face of it, well-meaning, as I said, but in practice it presents serious challenges. Who would organise and administer such elections? How would the eligibility to vote or stand be determined? What benefit types would qualify and what mechanisms would ensure proportional representation across regions, demographics and types of support? Those questions are not trivial; they go to the core of whether such a panel could ever be considered credible, workable or legitimate in the eyes of the public, including the very claimants it is intended to empower. I also suspect that it would take an age to establish. Those are rather harsh remarks, but I wanted to make those points.

Moreover, we must ask what value this mechanism adds that is not already achievable through more conventional, proven models of independent oversight. There are already established ways to ensure that claimants’ experiences and perspectives inform the design and review of eligibility verification processes through public consultation, user engagement panels, stakeholder round tables and the commissioning of qualitative research from trusted bodies. Those are the serious proposals the Minister must consider, and I am sure she will, in the formulation of the Bill.

The proposal put forward by the noble Lord, Lord Sikka, is surely a probing one, although I do not think he said that—but it does not stand up to scrutiny. For example, we must also consider the principle at stake here. Although it is right that we take account of the views of claimants whose lived experience is, I admit, vital in shaping fair and effective policy, it is not clear why 50% of an independent review body should be drawn exclusively from that group and no other. If the logic is that those affected by a policy should have a say in reviewing it, then surely one should equally argue that those funding the system—namely, taxpayers—should have a similar right to elect members or, indeed, that professionals with technical expertise in fraud prevention, digital systems or legal due process should be the ones appointed. In other words, this proposal risks becoming an exercise in representational logic that ticks a few boxes but is ineffective.

On the other hand, Amendment 91A in the names of the noble Lord, Lord Vaux, and the noble Baroness, Lady Kramer, speaks to principles that we on these Benches have returned to time and again, which I will not repeat now. Clause 75 establishes an independent review of how the Secretary of State’s powers are being exercised. It is only right and essential that when we assess how these powers are working in practice, we also assess how they are affecting those who are most at risk of being overlooked, misunderstood or wrongly penalised by the system. That is precisely what Amendment 91A would ensure. It would add a single but vital criterion to the scope of the review—the need to examine the impact on vulnerable persons, not as an afterthought or a footnote but as a formal and explicit part of the oversight process.

Why does this matter? We know from evidence, experience and common sense that those with vulnerabilities are more likely to struggle with complex paperwork, to misunderstand official communications and to have irregular financial arrangements that do not fit neatly into bureaucratic templates. Those individuals are not necessarily gaming the system; they are trying to get by. But unless the operation of the Bill is sensitive to their needs, they could too easily become the collateral damage of a system designed to root out frauds. Let us be clear: it is entirely possible to take tough action on fraud and take care not to harm vulnerable people in the process. It is not a question of either/or; it is a matter of how we build safeguards into the system so that it delivers justice, not just efficiency.

Amendment 91B, also in the names of the noble Lord, Lord Vaux, and the noble Baroness, Lady Kramer, addresses a critical point of principle—namely, that the independent reviewer must be genuinely independent. At present, Clause 75 allows the Secretary of State to determine what information may be disclosed to the independent reviewer. In our submission—and, I suspect, in the views of the noble Lord, Lord Vaux, the noble Baroness, Lady Kramer, and other noble Lords—this is not the way to construct a genuinely independent mechanism of review. We cannot have a system in which the Secretary of State can control the flow of information to the independent reviewer. We believe that this amendment would restore some balance.

Public Authorities (Fraud, Error and Recovery) Bill

Lord Palmer of Childs Hill Excerpts

Committee stage
Wednesday 18th June 2025 Grand Committee

[Lord Palmer of Childs Hill (LD)]

My Lords, as we consider Amendments 92 and 93 from the noble Lord, Lord Sikka, moved by the noble Lord, Lord Vaux, on his behalf, it is important to reflect on the balance between effective fraud prevention and the safeguarding of individual rights. Amendment 92 proposes that investigators’ powers of entry, search and seizure should be exercised only when accompanied by an authorised member of the police force. This approach could provide an additional layer of oversight and reassurance to the public, but it may also introduce operational complexities that could affect the speed and efficiency of investigations into public sector fraud.

Similarly, Amendment 93 seeks to require court authorisation before the Secretary of State can appoint authorised investigators. This would introduce judicial oversight, which is a well-established safeguard in many areas of law enforcement, and it could help to prevent the potential misuse of investigatory powers. But it may also add—as I said before—procedural steps that could delay urgent investigations, possibly hindering the recovery of stolen public funds, which is what this debate is all about.

Both amendments raise important questions about proportionality and accountability. I look forward to hearing the views of colleagues and the Minister on how best to achieve the right balance in this legislation, and I await their contributions.

[Viscount Younger of Leckie (Con)]

My Lords, I also wish to be brief and will cut down my notes, but this is a good opportunity to raise a number of points. I am very pleased that the noble Lord, Lord Vaux, has spoken to Amendments 92 and 93, as supported, or added to, by the noble Lord, Lord Palmer.

I share the principle that underpins Amendment 92 in the name of the noble Lord, Lord Sikka—that the powers of entry, search and seizure provided for in Clause 76 must be exercised responsibly and proportionately, with proper regard for the rights of individuals. However, my main point here is that, while the amendment aims to provide a safeguard by requiring investigators to be accompanied by a police officer when exercising these powers, I suggest that we need to balance that safeguard with a degree of practicality. If the use of these powers is deemed serious enough to require a police presence, one might reasonably ask an obvious question: why would the police not simply carry out the action themselves, under existing powers—I think that was the point that the noble Lord, Lord Vaux, made—rather than acting in an accompanying or supporting role? If these powers are to be used more routinely—for example, to support the investigation of lower-level but still costly fraud—do we risk placing a significant administrative and resource burden on our already overstretched police forces? I could say more on this, but I will not.

Amendment 93, also in the name of the noble Lord, Lord Sikka, seeks to insert an additional layer of judicial oversight into the appointment of authorised investigators by requiring that their authorisation is subject to court approval, rather than left solely to the discretion of the Secretary of State. Without going into the detail, I support the principle behind this amendment.

I will conclude by asking some questions of the Minister on process, which has been a consistent theme on this side in our previous four days in Committee. I am not expecting answers now; it is really to put down the questions along the themes that I have just spoken to. We have had some verbal reassurance from the Government that these powers will be used against property and not people. I am not quite sure how reasonable force can be applied against property but, more than this, it is clear from the text of the Bill that this is not legally guaranteed. Reasonable force could be wielded against people by DWP officers; I hope that the Government can provide more clarity on the balance of that. Can the Minister confirm that these powers could in fact be used against people, as well as property? That is quite an important point. Again, the argument is about whether the police or the DWP may be required. In addition, can she give us some more information as to why she believes these powers need to be granted to civil servants in the DWP?

I say again that the police are the recognised authority, who have legitimacy, in the eyes of the public, to exercise and apply PACE powers. I feel that the Government have a duty to defend, quite strongly, why they want to grant these sweeping powers to members of a government department such as the DWP. We have a police service for a reason: officers are trained, regulated and experienced in using these powers appropriately. If fraud is suspected, particularly at a serious level, is it not right that it should be investigated by the police and not delegated to civil servants?

My concluding comment is that we should be cautious about expanding investigatory powers without a clear and compelling case. My final question to the Minister is: what justification is there for bypassing the police? That plays into my main question, which is: whither the police and whither the DWP?

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[Baroness Sherlock (Lab)]

My Lords, government Amendments 94 to 97 are minor and technical in nature. In England and Wales, the common law does not permit access to material protected by legal professional privilege under any circumstances. However, relying on this common-law exclusion would not extend to Scotland. In addition, a different definition of legal privilege applies in Scotland. To ensure that the original intent is maintained, this position is now set out in a single provision within new Schedule 3ZD.

These amendments make it explicit that if the information being sought relates to personal records which involve confidentiality of communications that could be maintained in legal proceedings in Scotland, it cannot be seized, copied or obtained, et cetera. This ensures that the same protections for information of this type apply in Scotland as they would in England and Wales. I hope that these amendments are clear and I beg to move.

[Lord Palmer of Childs Hill (LD)]

My Lords, as we turn to government Amendments 94 to 97, I wonder, as I always do when there are lots of government amendments to their own Bill, whether enough thought has gone into it in the other place.

I know that these proposals are primarily technical, with the key aim of simplifying the drafting of new Schedule 3ZD to the Social Security Administration Act 1992. Government Amendment 96 introduces a single clear prohibition on the seizure or examination of information of legal privilege. This streamlining could help to clarify the legal position for both investigators and those subject to investigation, ensuring that the Bill’s provisions are easier to interpret and apply in practice.

Clarity in legislation is always desirable, especially in complex areas such as fraud investigation, where the rights of individuals and the needs of public authorities must be carefully balanced. At the same time, it is important to consider how these amendments interact with the Bill’s wider objectives of safeguarding public money and equipping authorities with the tools needed to tackle fraud and error effectively. Ensuring that information which is subject to legal privilege is properly protected is a long-standing principle within our legal system. These amendments appear to reaffirm that commitment without substantially altering the Bill’s intent. I have no problem in agreeing with what should have been in the Bill at the beginning.

[Viscount Younger of Leckie (Con)]

My Lords, my remarks largely chime with those made by the noble Lord, Lord Palmer. The Committee will be relieved to know that this is my shortest speech. I offer some measured support for these amendments. They address the important principle of the protection of legally privileged material, and in a way that simplifies and clarifies the drafting of this part of the Bill.

The right to legal professional privilege is, of course, a cornerstone of our justice system. That principle should be unambiguous in legislation of this kind. These amendments seek to express that safeguard more clearly through a single consolidated position. There is certainly merit in that. A simplified and consolidated statement of the limitation on investigatory powers in respect of privileged material is likely to be easier to apply in practice and could reduce the risk of inadvertent overreach.

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The final amendment in this group is unnecessary, as there is an obligation to appoint a reviewer in the beginning of new Section 109I(1). My read of this is that it simply allows the Secretary of State to have a different reviewer for England and Wales and for Scotland, but it is not an obligation to do so, so I am not sure that Amendment 99C is needed.

[Lord Palmer of Childs Hill (LD)]

My Lords, as we consider Amendments 99A, 99B and 99C, spoken to by the noble Baroness, Lady Finn, it is clear that these proposals are focused on the mechanisms of independent review and oversight within the Bill. Amendment 99A would ensure that the Secretary of State cannot limit the independent person’s review to only certain timeframes, thereby supporting the principle of comprehensive and impartial scrutiny. Amendment 99B would require the Secretary of State to provide information to the independent person for the purposes of a review, which could strengthen the independence and effectiveness of the review process. Amendment 99C would compel the Secretary of State to appoint independent reviewers not just in England but also in Wales and Scotland, ensuring a degree of consistency and regional representation in oversight arrangements.

These amendments appear to reinforce the Bill’s commitment to robust oversight and transparency, aligning with the existing provisions for independent inspection and review already outlined in the legislation. At the same time, it will be important to consider whether these changes might introduce additional administrative complexity or affect the flexibility of the Secretary of State to respond to evolving circumstances. As ever, the challenge is to strike the right balance between effective oversight and operational efficiency. I look forward to hearing the views of the noble Baroness, Lady Sherlock, on whether these proposals best serve the aims of accountability and good governance within the framework of this Bill. It is amazing what changing the word from “may” to “must” can do, but it can make a big difference and I wait to hear the Minister’s reply.

[Baroness Sherlock (Lab)]

My Lords, I am grateful for the contributions to this short debate. I hope that I can answer the questions that have been raised.

The first and most important piece of information is to remind the Committee that in the Commons my honourable friend the Minister for Transformation made it clear that His Majesty’s Inspectorate of Constabulary and Fire and Rescue Services will be commissioned to inspect the DWP’s criminal investigation powers for England and Wales and HMICS for Scotland. I hope that that is helpful. I can reassure the noble Baroness, Lady Finn, that the reason why we chose HMIC is that for more than 160 years it has been carrying out independent scrutiny of law enforcement in England and Wales, including the police. There is no danger whatever that it will be any kind of box-ticking exercise, if HMIC is doing it. I am sure that she can be reassured on that front.

I hope that that shows the level of commitment that we have to the level of scrutiny. If we want to do it properly, HMIC is the body to scrutinise powers of this seriousness. But we have worked closely with HMICFRS and HMICS. We intend to operate in the same way as other law enforcement agencies that are subject to inspections by those bodies. What will happen is that, prior to each inspection, the DWP and the inspectorate body will mutually agree the period that the inspection will cover. That is to make sure that the inspection can cover all necessary activity that has been undertaken, which is a common way of operating. We have no reason to believe that it will not operate well in this case.

We understand that sharing information is essential and will obviously not seek to misrepresent or hold back any relevant information. The legislation as drafted allows us to share all relevant information. But it is essential that the Secretary of State retains discretion—for example, being able to choose not to provide information that may be particularly sensitive and where sharing it could have a detrimental impact, such as on the outcome of an active case. The DWP will fully support and co-operate with the inspection bodies and its reports will make clear if we did not do that. But we want to do so, to make sure that we can deliver on these powers to the right standard.

I am grateful to the noble Lord, Lord Vaux, for answering one question for me. There will indeed be inspectorates. HMICFRS will cover England and Wales and HMIC will cover Scotland to enable us to have a different reviewer in the two places. I hope that, given those reassurances, the noble Baroness, Lady Finn, will not press her amendments.

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[Baroness Fox of Buckley (Non-Afl)]

My Lords, I warmly welcome these amendments in the name of the noble Viscount, Lord Younger. I appreciated the detail that he went into because it is important that we remember that these direct deduction orders are real instruments of power. I am interested in how they will be used differentially, because I do not want them to be a blunt instrument. Therefore, it is worth remembering and considering those who might be on the receiving end of them.

In an earlier group discussing search and seizure, I had been considering speaking but was in some ways put off, because I thought that the search and seizure measures were only meant for organised criminal gangs. As was pointed out, if that was in the Bill maybe it would be more reassuring. It is difficult to know how many people will be affected by the same powers. We want to differentiate, surely, between the vulnerable and an organised criminal gang. There are those who are technically fraudulent, but it is because they have made a mistake, and so on.

I particularly thought of that because I listened to a vivid documentary recently about bailiffs and people who had got themselves into all sorts of distress and debt, with bailiffs kicking down their doors. I had that caricature in my head, and I do not want that to happen to those people. I am not suggesting the search and seizure measures will lead in that direction, but we should always think: who is on the receiving end of these powers? How did they get into that situation? How does the Bill make a distinction so that we do not, on the one hand, have a one-size-fits-all approach? On the other hand—this is a slight anxiety I have— I do not want us to simply get into a situation where we are saying that, because people are on welfare, they are vulnerable. That is equally a caricature, and I do not think it is helpful for us to see people always in a victim role.

I would be interested—that is why I welcome this group—in making the distinctions and learning how the Minister envisages us making the distinctions between the multitude of people on welfare when these powers, which are quite severe in many instances, are going to be applied. How will that happen? Who makes the decision? I think that is why these amendments are very useful.

[Lord Palmer of Childs Hill (LD)]

My Lords, I am pleased in this instance to express my strong support for Amendments 99D and Amendment 109ZA, tabled by the noble Viscount, Lord Younger, and the noble Baroness, Lady Finn. I have not been quite so firm in my support for others, but Amendment 99D would ensure that, before any deduction is applied to recover debt overpayment, due regard is given to the wider circumstances and vulnerabilities of the liable person. There would be a requirement for this assessment to be documented and available to the claimant on request.

This is a vital safeguard that would place fairness and compassion at the heart of the debt recovery process, ensuring that individuals are not pushed into hardship without a proper understanding of their personal situation. It aligns with my and my party’s commitment to a welfare system that is both effective and humane, recognising that people’s circumstances can be complex—gosh, they certainly can be—and that a one-size-fits-all approach to debt recovery is neither just nor practical.

Amendment 109ZA—we have a wonderful numbering system—would further strengthen these protections by requiring the Minister to consider the additional costs of living with a disability before making a direct deduction order. This would be an essential step in ensuring that disabled people, who often face higher living expenses, are not disproportionately affected by debt recovery measures. Both amendments reflect the principles of proportionality and sensitivity that should underpin all government action in this area. They represent a significant improvement to the Bill’s framework for tackling fraud and error while safeguarding the dignity and well-being of the most vulnerable.

Unlike the noble Baroness, Lady Fox, who said she was a bit hesitant on this, I urge the Committee and the Minister to support these amendments, which would ensure that the pursuit of public funds is always balanced with compassion and respect for individual circumstances. At this stage of the Bill, as mentioned by the noble Viscount, these measures need to be introduced so that we can perhaps on Report include them in the Bill.

[Baroness Sherlock (Lab)]

My Lords, I am grateful to the noble Viscount for his amendments and to all noble Lords who have spoken. We all want to ensure that, when someone who is subject to these debt recovery powers is vulnerable, we are aware of that and take appropriate steps to treat them as we should. Before I turn to the individual amendments, I shall recap on how direct deduction orders will operate and what safeguards are there, as this is relevant to the debate.

These powers are vital to recovering funds that are owed by debtors who are—just to remind the Committee—by definition not on benefits or PAYE. If they were, we would have other ways to deal with them. These are people who have some other source of income, owe the DWP money and have simply refused to engage with us at all, at any stage. That does not mean that none of them is vulnerable—of course, they may be—but this is the category of people that we are talking about. The department has long-standing powers to recover public money that has been wrongly paid in excess of entitlement, through deductions from benefits or earnings, but not for those in that category.

There are important new safeguards for these powers. They are there only as a last resort. First, before they can be used, multiple attempts at contact must be made, of different types. We must make at least four attempts to contact someone, at least twice by letter. We not simply trying once and giving up. We must have really tried to engage with people who simply do not engage with us all.

Secondly, when a direct deduction order is necessary, the DWP must be satisfied that any deduction, whether a lump sum or a regular deduction, will not cause the debtor, other account holder or their dependants hardship in meeting ordinary living expenses. That means that, legally, the DWP must ensure that there is enough money remaining in an account after a lump sum deduction to allow the debtor to meet their essential living needs.

In response to the noble Viscount, deductions must be fair in all the circumstances. This would include consideration of any vulnerabilities or additional costs related to living with a disability. The noble Viscount helpfully outlined what some of those will be. The point is that they must be particular to the individual. Each individual’s circumstances will be different. As the noble Baroness, Lady Fox, pointed out, not everybody who is poor is vulnerable, not everybody who is on benefits is vulnerable and not everybody who is disabled is vulnerable, necessarily. We need to understand their circumstances to know what is fair and ensure that they will not be pushed into hardship by a deduction.

Thirdly, to ensure that the deduction is made in that way, the amounts will be decided following an affordability assessment based on information shared by the debtor’s bank and any subsequent representations made by the individual or their representative if they need someone to speak for them. Legislation sets out the maximum amounts that can be deducted for regular deduction orders.

Fourthly, the Secretary of State can vary or revoke direct deduction orders in the light of a change of circumstances—for example, if the debtor had a change of income, made a new claim to benefit or something else of significance happened. Fifthly, when a direct deduction order is made, notice must be given to the bank and all holders of the account in question. If an order is still upheld after a review, or after considering information that has been presented, an individual who is not happy with that has a right of appeal to the First-tier Tribunal.

Finally, I remind the Committee that a code of practice for the new powers has been made available for noble Lords to review. This sets out revised guidance on ways to identify and support those who are vulnerable. Ahead of public consultation, our team continues to work on the code collaboratively with key stakeholders, including charities such as Surviving Economic Abuse and the Money and Pensions Service. These are important safeguards which I hope will alleviate noble Lords’ concerns.

On Amendments 99D and 109ZA, it is worth looking at what these amendments would do in practice. While we all share the desire to protect vulnerable groups, these amendments would place additional legal duties on the DWP to consider the impact of any vulnerabilities that a debtor may have, even when it could not be reasonably possible for the DWP to know. These requirements would be imposed without providing any new ways for the DWP to obtain that information.

As I have said, the direct deduction order power is one of last resort, aimed at those who are not on benefits or in PAYE employment, where all reasonable attempts to engage with the individual have failed. These are individuals who have not responded to repeated contact from the DWP’s debt management officials about their debt. In the absence of meaningful engagement from the debtor or their representative, the DWP will not be aware of their current personal circumstances. This puts the DWP in a difficult, if not impossible position, regarding the obligations that the proposed amendments would impose.

However, we need safeguards. The new safeguards that are introduced in this Bill, which I outlined at the start of my speech, alongside the existing safeguards and departmental processes for supporting those who are vulnerable, reflect a better approach to protecting vulnerable people. I shall now set out some of those existing safeguards and processes that are outside of this Bill, for the record.

Layers of support already exist within the DWP to support those who are vulnerable or have complex needs. They include proactive vulnerability checks at different points in the customer journey, and where vulnerable individuals are identified, to ensure that the necessary support and adjustments are put in place. Where any additional support or adjustments are identified by a DWP official or are disclosed by the individual, they are recorded on DWP systems to ensure that all officials know how best to support them.

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[Lord Vaux of Harrowden (CB)]

My Lords, I will speak briefly to Amendments 102 and 122, which would require the Secretary of State to apply to the court for a direct deduction order—a DDO. I confess that I am struggling a bit to understand the circumstances in which the Secretary of State would be able to make a direct deduction order, as the Bill is drafted. I hope the Minister will be able to help me.

When we discussed the DDOs in relation to Part 1 of the Bill, the noble Baroness, Lady Anderson, correctly pointed out that a direct deduction order could be made only in circumstances where either there had been a final determination of the amount of the liability by a court or the person concerned had agreed that the amount was payable. I agreed then that that was an important safeguard, as it is a significant restriction on when the DDO process could be used under Part 1. I asked why, if the court was making the determination of liability, we did not just leave the court to determine the way in which it should be repaid, rather than requiring new powers for the Minister to make that decision. The noble Baroness was kind enough to offer to write to me on that, and I very much look forward to receiving her letter.

However, I think the same issue may arise here, except that I am struggling to find the definition of the amount recoverable described in paragraph 1(1) of new Schedule 3ZA, inserted by Schedule 5 to the Bill. Can the Minister please explain how the amount recoverable is determined, and by whom? Does this part have the same safeguard as Part 1, which is either final court determination or agreement by the person concerned, or is it at the discretion of the Secretary of State? I can see, in Clause 89, that the person must have been convicted of an offence or agreed to pay a penalty. That raises the question: does this DDO regime apply in cases or error, or not? Presumably, in cases of error there will not be a conviction or a penalty, so it does not apply in the case of error, but I am confused.

I cannot find anywhere the amount being determined by a court; that is where I am struggling a bit. If the recoverable amount has not been decided by the court, then the amendment in the name of the noble Baroness, Lady Fox, is likely to be necessary. That is particularly important because, just as it does in Part 1, for understandable reasons, the appeal process to the First-tier Tribunal against a DDO prevents a person appealing with respect to the amount that is recoverable. If that is the case, and the amount recoverable has not been determined by a court, I think there is an issue here.

[Lord Palmer of Childs Hill (LD)]

My Lords, I am proud to support Amendments 102 and 122, which I tabled alongside the noble Baroness, Lady Fox of Buckley. Amendment 102 proposes that the power to make direct deduction orders should rest with the courts following an application from the Secretary of State, rather than allowing the Secretary of State to impose such orders directly. This change would introduce an important layer of judicial oversight, ensuring that deductions from individuals’ bank accounts are made only after careful, independent consideration of the evidence and the circumstances.

Although the Bill includes safeguards such as affordability and vulnerability checks, as enumerated by the Minister, and rights to representation and appeal, placing the final decision in the hands of the court would further strengthen public confidence in the fairness and proportionality of the debt recovery process. Amendment 122 is consequential on this approach, ensuring consistency throughout the Bill. By requiring court approval for direct deduction orders, we uphold the principle that significant intrusions into personal finances should be subject to the highest standards of scrutiny and due process. This is particularly important given the potential for hardship and complexities that can arise in cases involving joint accounts or vulnerable individuals. I hope the Minister can address that when she replies.

These amendments do not seek to undermine the Government’s legitimate efforts to recover public funds lost to fraud or error but rather to ensure that such efforts are always balanced with robust protections for individual rights. I urge fellow noble Lords to support these amendments as a constructive step towards a more transparent and accountable system, and I am very pleased to have signed this amendment in the name of the noble Baroness, Lady Fox.

[Viscount Younger of Leckie (Con)]

My Lords, I have a degree of sympathy for the amendment in the name of the noble Baroness, Lady Fox, and the noble Lord, Lord Palmer of Childs Hill. It touches on a value that I know many of us across this House instinctively support: namely, that powers which interfere with the person’s finances should be subject to proper oversight and scrutiny—in other words, by a court and not by a politician. Let us start with that.

The principle underpinning the amendment is sound. When the state seeks to impose a direct deduction from an individual’s account, that is no small matter. It affects not just policy outcomes but people’s daily lives, and we should never lose sight of that. Much was spoken about that in earlier groups. I am sure that the noble Baroness, Lady Fox, and the noble Lord, Lord Palmer, have suggested introducing a requirement for the court to authorise such a deduction because it reflects the gravity of that particular action.

However—there is a however—although I support the sentiment, I have reservations about the practicality, and I am afraid that the remarks from the noble Baroness, Lady Bennett, have increased my concerns. Requiring every direct deduction order to go through the courts will prove burdensome to the judicial system and may risk making this part of the regime so slow and administratively heavy that it becomes inoperable in practice. That would not only undermine the Government’s legitimate aim of tackling fraud effectively and speedily, but could also result in delays and uncertainty for claimants and public authorities alike. Just to be helpful to the Minister, can she enlighten us on the current state of the backlog in the courts—which is a message she might expect me to give—and how, therefore, Amendment 102, for example, might not be helpful to the process?

I have another question about an appeals process. Everyone, I believe, has the right to an appeal, but how would this work, given the status of the courts? That is a question for the Minister to ponder over. We are, after all, talking about a mechanism intended to recover public money in a targeted and efficient way. If every deduction, regardless of scale or complexity, must first pass through court proceedings, we risk erecting a barrier that stifles the entire process. There must surely be a way of reconciling the desire for oversight with the need for operational efficiency—a challenge that I lay down to the noble Baroness, the Minister.

So, while I cannot support the amendment as currently drafted, I agree that the principle of independent oversight should not be overlooked. There may be better ways of embedding that principle in the system through enhanced safeguards; clearer audit mechanisms; greater efficiency and speed—that is, in expediting the DDOs; and improving transparency around how deduction decisions are made and reviewed.

I recognise this from all who have spoken, and I have listened carefully to all the speeches. I believe that these amendments, and particularly Amendment 102, starts a valuable conversation; even if its solution is not quite the right one, its motivation certainly is. I hope that the Minister can reassure the Committee that the Government recognise the need for these powers to be exercised responsibly but also sensibly so that they can operate effectively, and that they are open to exploring proportionate mechanisms of accountability that simply do not grind the system to a halt, and if so—a very simple question to end on: what could this system be?

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Moved by

[Lord Palmer of Childs Hill]

103: Schedule 5, page 105, line 18, leave out from beginning to end of line 33 on page 106.
Member’s explanatory statement
This will prevent the DWP from being able to compel banks to disclose the bank statements of benefits recipients to decide whether to issue direct deduction powers.

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[Lord Palmer of Childs Hill (LD)]

My Lords, I move Amendment 103 on behalf of my noble friend Lady Kramer, who is in the Chamber. We are all playing ducks and drakes with where we are. The amendment was tabled by my noble friend and the noble Baroness, Lady Bennett of Manor Castle. It would prevent the Department for Work and Pensions from compelling banks to disclose the bank statements of benefit recipients in deciding whether to issue direct deduction orders.

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I understand the points made from different directions of the Committee, but I hope that that is enough to allow the amendment to be withdrawn.

[Lord Palmer of Childs Hill (LD)]

I thank the Minister very much for responding in that manner, but it is rather like a court case where they say that the jury should disregard what happened. Once the information is out there, human nature makes it very hard to avoid it. If you are the DWP and you look at a bank account and see something that you should not, it is hard then to ignore it. The nature of man and woman is not to ignore things that they see. I am afraid that that just came to my mind: it is like these television dramas where the barrister or lawyer raises points, and the judge says, “The jury should disregard that”. You cannot disregard what you see in a bank statement even if you decide that you should not really have seen it. This is a very dangerous precedent, and I do not think the Minister is living in the real world.

[Baroness Sherlock (Lab)]

I just remind the noble Lord that these DWP staff are authorised fraud investigators and they work on our fraud teams. In the nature of their work, as it is for anybody who works in fraud or law enforcement, they will end up seeing information, in the course of an investigation, that is not relevant. If he thinks that that means that that information will necessarily get into the outside world, then I ask him to rethink that. Our staff are professionally trained. They are professionals who operate under professional standards, authorisations and accreditation. They know what their job is. If staff come across information and the law quite clearly says that it may be used for only one purpose, it will be used for only that purpose.

[Lord Palmer of Childs Hill (LD)]

I am sorry, but this does not take account of rogue members of the DWP. I am sure that 99.99% are exactly as the Minister says, but the idea that everyone will observe those rules is—I say again—not the real world. I beg leave to withdraw the amendment in the name of my noble friend Lady Kramer.

Amendment 103 withdrawn.

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Moved by

[Lord Palmer of Childs Hill]

109: Schedule 5, page 108, line 12, at end insert—
5A “(1) Before any direct deduction order under this Schedule is made, the Secretary of State has a duty to consider its effect on any person who—(a) is a victim of domestic abuse, or(b) the Secretary of State reasonably believes to be at risk of domestic abuse.(2) For the purposes of this paragraph, “domestic abuse” has the meaning given by section 1 of the Domestic Abuse Act 2021.”

[Lord Palmer of Childs Hill (LD)]

My Lords, the amendment seeks to ensure that, before any direct deduction order is made under this schedule, the Secretary of State must consider the effect of such an order on any person who is a victim of domestic abuse, or whom the Secretary of State reasonably believes to be at risk of domestic abuse.

While the Bill rightly includes very important safeguards, such as affordability and vulnerability checks, and limits on the amounts that can be deducted to protect debtors from undue hardship, these general measures may not provide sufficient protection for those experiencing or at risk of domestic abuse, whose circumstances are often uniquely precarious and complex. Victims of domestic abuse frequently face financial control and instability, and the imposition of a direct deduction order could inadvertently place them at greater risk, either by exacerbating economic hardship or alerting an abuser to their financial situation. It is therefore essential that the Secretary of State has a specific statutory duty to assess the impact on this particularly vulnerable group before any order is made. By adopting this modest amendment, we would strengthen the Bill’s existing safeguards and ensure that the most vulnerable are not further disadvantaged by well-intentioned recovery mechanisms. I urge noble Lords to support the amendment in the interests of justice, compassion and the protection of those at risk. I beg to move.

[Viscount Younger of Leckie (Con)]

My Lords, I offer my strong support for Amendment 109, tabled by the noble Lord, Lord Palmer. It proposes a vital and compassionate safeguard that ensures that, before any direct deduction order is made, proper consideration is given to whether the individual involved is a victim of domestic abuse—or certainly at risk of it.

We know that domestic abuse too often includes economic and financial control. Perpetrators may take over access to bank accounts, manage benefit claims in their partner’s name or use coercion to extract money. For victims in these circumstances, a deduction order made against a joint or controlled account is not just a technical enforcement step but can be catastrophic and expose them to further harm, deepen their financial insecurity and reinforce the very cycle of abuse that they are trying to escape. The amendment puts in place an essential duty that, before such a deduction is imposed, the Secretary of State must ask a basic question: is this person safe? Are they vulnerable specifically to domestic abuse? Could such action cause caused further harm? I am sure the Committee will realise that these comments are not new. This is not about creating loopholes but about making sure that we do not inadvertently punish the very people who most need our protection. If our system is to be just, it must distinguish between those who are deliberately defrauding the system and those who are themselves being defrauded, manipulated or coerced in private and invisible ways.

I fully recognise—others may raise this point—that this kind of information is not always easy to obtain. As we know, domestic abuse is often hidden, and victims may be reluctant or unable to disclose it. But that is not a reason to avoid the responsibility. On the contrary, it is precisely why we must build protective considerations into the decision-making process. So, if a red flag is raised—whether through third-party evidence, existing support services or patterns in the account—the system must be capable of pausing, asking the right and necessary questions and adjusting course. That is surely not an undue burden; it is what we should expect of a responsible, modern enforcement regime.

Of course, I also note that the Government already have duties under the Domestic Abuse Act 2021—I expect we will hear this from the Minister—and under the wider Equality Act to consider how their decisions impact vulnerable groups. But this amendment gives practical effect to those duties in the specific context of direct deduction orders. It does not create new rights out of thin air; it reinforces and operationalises obligations that the state already carries.

So I ask the noble Baroness two questions. In the system and process designed, and having reached proof of concept with the banks—at least on two occasions; I refer back to previous comments—who is responsible for recognising these issues in respect of account holders? Is it the banks? To what extent do they know such detail about their account holders? Or is it the DWP? Is it more likely to know of such matters? Obviously, in the discussions leading up to and beyond the decision to give out benefits, such issues surely would have emerged. Perhaps the Minister can enlighten us on the precise responsibilities here.

Perhaps the Minister can also confirm that the banks would not see the analysis of vulnerability as a key part of their responsibility—that is linked to my previous point—but that their role is simply to raise a red flag with deliberately limited data, as has been outlined, where there is that match of an account holder in receipt of benefits who also has £16,000 or more in an account.

The final question, which chimes with questions asked on perhaps day 4 of Committee, is: how often are such checks carried out by banks, as requested by the DWP? Or—I need to be put right again; forgive me—is the algorithm such that a flag is raised on a 24/7 basis by an algorithm that does a match? Then a report is given to the bank’s responsible person—let us call him the banking manager.

There is a thread running through this debate about how to balance power and protection. Indeed, it is an issue on which noble Lords across the Committee agree; therefore I warmly welcome this amendment from the noble Lord, Lord Palmer, as it provides us with another opportunity to test out the Government and raise our concerns. This amendment is principled, proportionate and practical. I hope the Government will take it seriously, in the spirit it is meant, and reflect carefully on the values it enshrines. I believe it gets to the very essence of what the Bill is about. With that, I look forward to the answers from the Minister.

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I hope that reassures noble Lords that these concerns are being taken very seriously in both the department and the Bill, and that the DWP is taking steps to mitigate risks for victims, survivors and those at risk of domestic abuse. I hope the Lord will feel able to withdraw his amendment.

[Lord Palmer of Childs Hill (LD)]

I withdraw the amendment.

Amendment 109 withdrawn.