Lord Vaux of Harrowden
Main Page: Lord Vaux of Harrowden (Crossbench - Excepted Hereditary)Public Authorities (Fraud, Error and Recovery) Bill
Lord Vaux of Harrowden Excerpts
Baroness Anderson of Stoke-on-Trent (Lab)
I reassure your Lordships’ Committee, particularly the noble Lord and the noble Baroness, that the PSFA and HMRC or the DWP can and will do dual investigations and work closely together. They have their own powers. I think the case of HMRC is probably more relevant than the DWP, but they will work collaboratively and do joint operations while having their own separate remits. It is not that they will not work together; however, we anticipate that especially where there is evidence—as I said earlier, it is about breadth of government—we would expect the majority of the PSFA’s work to be outside of those government agencies or public authorities.
Amendment 7 is unnecessary because it straight- forwardly duplicates matters already dealt with elsewhere in the Bill. Clause 1(1)(a) states that the Minister is given the function of investigating “suspected fraud” against public authorities. Clause 70, the interpretation clause, defines “suspected fraud” as
“conduct which the Minister has reasonable grounds to suspect may constitute fraud”.
I hope that the noble Baroness, Lady Finn, is content that the issues she raises in this amendment are appropriately dealt with.
Finally, Amendment 8 would restrict the fees that the PSFA could charge a public authority for investigation, enforcement or recovery action to no more than the amount that is recovered. Cash recovery is the hardest part of enforcement. Many initiated investigations will close without reaching the recovery stage—for example, because no fraud is found, an alternative approach is taken or because recovery is not possible even if the investigation is successful. The amendment would mean that no fee could be charged in those cases, despite the PSFA having necessarily invested resources into the investigation with the agreement of the public authority to have taken the case and undertaken the actions in the first place. That does not represent good value for money and runs contrary to the guidance in Managing Public Money on cost recovery.
In the most serious cases, cash recovery may not be the main or even a major factor; it will be the disruption of criminal gangs and prosecution of serious offenders. Such cases may be long, complex and multi-agency, and costs will probably exceed any potential recovery quite quickly. In cases of organised crime, assets may be irretrievable, laundered beyond reach or overseas. The public interest in investigation is to punish the criminals. The adoption of this clause would also fail to acknowledge or promote the deterrent effect of the investigations. The PSFA cannot be restricted in the cases that it selects by how much of its costs it can recover; that is counterproductive and counterintuitive.
I have two other points to raise.
Lord Vaux of Harrowden (CB)
I beg the noble Baroness’s pardon but, if the PSFA can charge more than it recovers, is that not a massive disincentive for the public authority to ask it to come in to begin with, given that it has to ask ?
Baroness Anderson of Stoke-on-Trent (Lab)
There is a balance here, because of the positives that go alongside this. There is a genuine issue that, if a criminal gang is actively targeting a public authority, the investigation and prosecution of those people in itself is something that the public authority would wish to see. There will always be costs involved in criminal activities, even if they cannot all be recovered. The police actively investigate criminal gangs, with the pragmatic understanding that not all costs can be recovered. There is also a deterrent effect in prosecuting people to ensure that everyone is aware that, if you defraud the state, you will be prosecuted. We will not always be able to get the money back, but we must be realistic about what is in front of us and what we can achieve.
Baroness Finn (Con)
My Lords, the powers granted in this part of the Bill are necessary in principle, although the core principle of proportionality, which guides our approach on these Benches, means that we have some suggestions for improvement. We need to make sure that this system has adequate safeguards, protections and balance. I want to reiterate the view that in pursuit of a legitimate objective, we do not succumb to a temptation for overreach or powers which are too sweeping.
Our Amendment 9 introduces a reasonableness threshold, which has to be met before an information notice can be submitted. This amendment is designed to ensure that the information notice, which imposes a duty on the relevant person to provide information to the Minister, is imposed on that person only if there is a reasonable belief that the information notice would be proportionate.
We need to bear in mind throughout these discussions that the Bill establishes a substantial array of duties and responsibilities, and we need to make sure that when powers are exercised, they are done so with those burdens in mind. Our proposal that these powers can be exercised only when seen as reasonably proportionate incorporates this balance and will ensure that additional operational burdens are not imposed unless thought necessary.
Further, Amendment 10 seeks to protect the person to whom the information notice relates from unfair treatment ahead of any final conclusion about their liability. Banks and financial institutions, particularly when the Bill first comes into effect, will naturally be concerned that they are being asked to provide information about one of their customers in relation to fraud. It is feasible that the said bank may want to withdraw some banking services from the person in question, and it is therefore a reasonable demand that the Government make clear that the person in question is not necessarily guilty of the suspected fraud. We need to make sure that the verdict is not inadvertently passed on the person before a conclusion is reached, and this amendment would ensure that an investigation does not end up constituting a sentence.
Our Amendments 11, 12, 13 and 14 all address the technicalities of the review mechanism and seek to probe the Government on why they have set up the review mechanism in the way that they have in the Bill, Amendment 11 questions the Government on why they have defined 10 working days as the lower limit for the period in which the person to whom the information notice is given has to comply with the demands in the notice. Can the Minister assure the Committee that this period has been set based on a discussion with relevant persons to whom this duty will apply? Again, we need to recognise that this is a duty being imposed on third parties, and we need to balance it with the other activities undertaken by those persons.
Amendment 12 seeks to clarify how a review process could be initiated by the person to whom an information notice is given, which, alongside Amendment 13, seeks to make it easier for the person to review this decision with a longer timeframe. Amendment 14 would oblige the reasons for any decision reached following a review to be set out in writing, placing an additional duty of responsibility and accountability to the Minister for the steps they decide to take.
Alongside the reasonableness test outlined in our Amendment 9, these provisions work to make sure that the powers under the Bill are exercised proportionately and that they are balanced alongside adequate provisions for review, which will promote the sensible application of these notices.
Finally, Amendments 15 and 16 seek to protect the information of a person which has been shared with the Minister by limiting the people with whom that information can be shared. Defining in law that only specific people can have sight of personal, sensitive information is a proportionate check on the power of the Minister and will have the twofold benefit of protecting people who, we must remember, are not actually necessarily guilty of fraud, with the need to check their information to ascertain this fact.
The principle of obtaining information about a person is necessary for the provisions in the Bill to work and the objectives we all share to be met. Our amendments seek to nuance and improve the exercise of these powers by adding a reasonableness test, a clarification of the review process and additional controls on data sharing to protect those to whom the information notice relates. We hope that the Government and noble Lords across the Committee will recognise these improvements to the provisions currently set out in the Bill on information notices and the relevant review processes, and that these will be supported as measured and balanced proposals. I beg to move.
Lord Vaux of Harrowden (CB)
My Lords, I will very quickly make a couple of comments on Amendments 9 and 10. First, on Amendment 9, I have an amendment later in Committee that inserts a reasonableness point in a similar way, so I support this. However, I wonder whether this amendment is actually in the wrong place; I suggest that it ought to be in the initial line—“the Minister should reasonably consider”—as opposed to “reasonably proportionate”, but that is a small issue. I support the concept of Amendment 9.
Amendment 10 is quite important. This issue has been raised by the banking industry, and there is a very real concern that the receipt of a notice might provide reasonable grounds for the financial services firm to know or suspect that the customer has defrauded the public sector. In that situation, the failure to take action, for example to close or restrict the account, might conflict with wider anti-money laundering obligations and, possibly—I am not sure this is right—the corporate criminal offence of failure to prevent fraud. That might include having to exit customer relationships and so on.
So there is a very real concern from the financial services industry here. I am sure that that is not the intention of the Government in this situation but it is something that we need to think about, as the receipt of a notice cannot be seen as reasonable grounds to suspect fraud, because that would set all sorts of hares running against people who might be entirely innocent.
Baroness Kramer (LD)
My Lords, I will just pick up the issue that has been raised by the noble Lord, Lord Vaux. We are dealing tomorrow with a statutory instrument that attempts to provide safeguards against banks and other organisations deciding to close people’s bank accounts or to deprive them of other financial services. It is often the people who are under the most financial pressure who find it difficult to get banked in the first place. They can get a basic bank account if they are lucky, but to get a bank account with any of the features that make financial life reasonable is exceedingly difficult. I therefore share the noble Lord’s concern that we do not start a hare running.
Banks are eager to offload people who do not have a lot of exciting and interesting activity. If this notice gives them an excuse to do that, I can see that an awful lot of banks will seize that opportunity, so I raise this as an issue to be wary of. In fact, we have an SI going in the opposite direction tomorrow, so this is really for the Government to make sure that one hand knows what the other hand is doing.
Baroness Anderson of Stoke-on-Trent (Lab)
My Lords, I apologise in advance, because I think we are about to have a vote—or not, if the noble Baroness, Lady Kidron, does not press her Motion.
Some significant points have been touched on in this very short debate. I will respond to each amendment in turn. Amendment 9 looks to introduce a test of reasonableness to determine whether an authorised officer has appropriately considered that information sought is both necessary and proportionate. Clause 3(1)(a) and (b) already set out the test for issuing an information notice: an authorised officer will have the power to compel information only when it is necessary and proportionate to do so, and only when the information being requested relates to a person whom an authorised officer has reasonable grounds to suspect has committed fraud.
Lord Vaux of Harrowden (CB)
What the Minister says is not quite true. It is where “the Minister considers” that it is necessary and proportionate to do so, not simply where it is necessary and proportionate to do so. That is an important difference—hence the reasonableness requirement.
Baroness Anderson of Stoke-on-Trent (Lab)
The noble Lord is going to inspire me to go into more detail. There must be reasonable grounds to suspect that fraud has taken place, which follows the basic rule that there must be an objective basis for that belief. It must be genuinely suspected that the fraud has been carried out by the individual, and the belief must be based on facts and/or information that are relevant to the likelihood of needing to obtain information for the purpose of investigating suspected fraud against public authorities. It must be objectively reasonable for them to suspect this, given the information available to them. The reasonable grounds test is a standard and widely accepted test used by various organisations, including the DWP, the Serious Fraud Office and the police. We are seeking to replicate that.
Baroness Finn (Con)
My Lords, it is me again. Our proposal in this group is that Clause 7 and the corresponding Schedule 1 do not stand part of the Bill. The powers granted to civil servants under the provisions in this clause are sweeping, and we believe that they are better exercised by those with adequate training and experience—namely, police officers.
I will cover in a little more depth what this clause is proposing. Clause 7 would allow junior civil servants in the Cabinet Office—relatively junior, at HEO level—to apply to a Justice of the Peace for a warrant to enter and search premises for material relevant to an indictable offence. These civil servants can enter the property whether the relevant person is present or not, and they will have the power to seize anything if they have reasonable grounds for believing that it has been obtained in consequence of the commission of an offence or is evidence in relation to an offence. Section 20 would grant these civil servants the power to seize computerised information, and Section 22 would allow PSFA investigators to retain seized property for as long as necessary in all circumstances.
These are police powers, yet under this clause they are to be exercised not by police officers but by civil servants who, however well intentioned, are under no legal obligation to have the legal training or operational experience that should be required to exercise such powers responsibly. We believe that if an intervention required as part of an investigation is serious enough to justify a search warrant and serious enough to justify entering a person’s private premises and removing their belongings, it is serious enough to require the presence of a police officer, who is recognised as the proper legitimate authority who should bear the responsibility for exercising these powers.
There is a practical point here too. If the Government believe that fraud against the state requires this level of intervention, they should work with law enforcement to build capacity, not bypass it. It is the job of the police to investigate crime, including fraud; that is the basis for their training. That is the established legal framework in which they operate and that is what the public expect. We should not seek to empower civil servants to do the job of police simply on the basis of current operational capacity. Once again, we return to our maxim of proportionality: we need to make sure that the necessary powers in the Bill are exercised responsibly and in a way that is both balanced and effective.
I want to be clear that what we are proposing will not prevent the PSFA undertaking its investigations. Once the threshold for the exercise of these powers has been met, the investigation itself will have had to progress considerably if a warrant is to be issued. Given the way these powers are set out in Clause 7, the Government are obviously certain that investigations will be able to proceed substantially without the need for these powers. Our proposal that they be removed from the remit of civil servants and held instead by the police, which is the established, recognised authority that largely wields these powers at present, will therefore not infringe on the capacity of the PSFA to investigate fraud, as recognised by the Government.
This is therefore another exercise in balance. We believe that our suggestion that Clause 7 and the corresponding Schedule 1 do not stand part of the Bill balances the need to counteract fraud with the imperative that we do not grant sweeping powers to civil servants who are not sufficiently trained, experienced or recognised to exercise them in the proportionate, measured and sensible way we need to be able to guarantee in the Bill. For those reasons we do not believe that Clause 7 and Schedule 1 should stand part of the Bill. We urge the Government to reconsider this approach and to ensure that powers of this magnitude are exercised only by those with the proper training, the proper accountability and the proper role: our police services.
Lord Vaux of Harrowden (CB)
My Lords, the noble Baroness, Lady Finn, has said it all, so I will be very brief. I have to say that I am extremely uncomfortable with giving these sorts of police powers to civil servants and others. We have an example in the recent past of powers being used inappropriately by a non-police agency in the Post Office Horizon situation. I am very uncomfortable about it. I am interested to hear why we should not allow the police to deal with these things and why we should give them to civil servants, but I will take some convincing.
Baroness Anderson of Stoke-on-Trent (Lab)
My Lords, I think it is now my turn to say, “I’m back”. This is a very important part of the Bill, and it is right that we discuss it in some detail. It was also raised by the noble Baroness, Lady Kramer, in the previous group.
I thank the noble Baroness, Lady Finn, for flagging her concerns regarding the PSFA seeking powers under the Police and Criminal Evidence Act 1984. For ease, I will now refer to it as PACE. Clause 7 designates authorised investigators with the necessary authority to use limited provisions from PACE within the remit of public sector fraud investigations. Specifically, they are the power to apply to the courts for a warrant to enter and search premises and seize evidence and special provisions to apply to the courts to gain access to certain types of material which are regarded as excluded material or special procedure material. These powers will only be used in criminal investigations to enable all reasonable lines of inquiry to be followed and all relevant evidence to be collected.
To reassure noble Lords, when executing a search warrant, authorised investigators will be accompanied by an officer who has the powers of a constable. This could be either a police officer or an officer from another government department, such as HMRC or the NCA, with the powers of a constable. They will ensure the safety of the authorised investigators and will be able to use their own powers of arrest or reasonable force if necessary. We are not seeking for the Cabinet Office to have powers of arrest. They will always be accompanied by appropriate officials who have powers under PACE.
Authorised investigators will adhere to the relevant PACE codes of practice, which provide robust safeguards around the use of these investigative tools. Every application for a search warrant or a court order under PACE must be scrutinised and authorised by the court. Authorised investigators will also be subject to robust internal and external scrutiny. This will come from the PSFA’s independent person, as appointed under Clause 64, His Majesty’s Inspectorate of Constabulary and Fire and Rescue Services and, as required, the Independent Office for Police Conduct.
To reassure the noble Lord, Lord Vaux, we are very aware of the Horizon scandal and the impact that that had on normal people’s lives. We want to put in every safeguard to make sure, and we hope we have, that these powers could not be used to replicate such a scandal. The PACE powers sought in Clause 7 are the minimum necessary to allow the PSFA to effectively undertake criminal investigations. We are not seeking the full use of PACE powers under this clause for the PSFA.
Turning to Schedule 1, this modifies the provisions of PACE adopted in Clause 7 so that they apply appropriately to authorised investigators within the PSFA. Schedule 1 provides a route for authorised investigators to apply to the court for access to excluded material. Access to special procedure material is provided under Clause 7 and Schedule 1 to PACE. It also establishes a legal framework that allows the PSFA to transfer evidence seized under PACE to other organisations, securing the chain of command—I mean the chain of evidence. It has been a long week; I was getting married a week ago.
Lord Vaux of Harrowden (CB)
My Lords, the Minister mentioned a number of safeguards, including the authorised officer being accompanied by a police constable. I cannot find any of that. Where can I find those safeguards?
Baroness Anderson of Stoke-on-Trent (Lab)
The noble Lord raises a very interesting point. It is in the guidance, but I will write to him so that he has a written record.