Public Authorities (Fraud, Error and Recovery) Bill

Lord Vaux of Harrowden Excerpts

Committee stage
Monday 9th June 2025 Grand Committee

I trust I have reassured the Committee that the Bill contains sufficient provisions and safeguards for an individual to avoid this power entirely, and that they have the right to challenge the terms of the order to the PSFA and then to a tribunal should it not agree.

[Lord Vaux of Harrowden (CB)]

The noble Baroness mentioned a moment ago that a direct deduction order can be made only when a person has already agreed that an amount is recoverable. Could she point out where that is in the Bill? I cannot find it anywhere.

[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.

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

I thank the noble Viscount for giving me the opportunity to reassure him that, yes, it can and it will.

[Lord Vaux of Harrowden (CB)]

On Amendment 55, I understand that 24 months may not be the right number, but it cannot be right that an order can stay open indefinitely so that, 10 or 15 years later, the PSFA can suddenly start taking money from the account again. There must be some sort of drop-dead point; I wonder where that should sit.

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

I beg the leave of the Committee to consider that; I will reflect on it and come back in due course.

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[Baroness Finn (Con)]

I apologise to your Lordships. The Committee will be fed up with hearing from me before the afternoon is out. No? Excellent.

We all agree that fraud against the public purse is wrong and must be tackled, but we must also be honest about who is being asked to do the work and at what cost. Banks are expected under the provisions in the Bill to dedicate staff, systems and time to support public sector fraud investigations or enforcement efforts. This may be in the form of complying with information notices, processing and applying deduction orders, or liaising with government departments. These activities are not core business functions for a commercial bank. They are not revenue generating. They do not serve the bank’s shareholders or contribute directly to its customers’ financial well-being. They are, in essence, a form of public service being performed by a private entity.

Here is the crux of the matter: every hour a member of the bank staff spends assisting with a public fraud case is an hour that they are not spending on risk management, product development, client service or revenue generation. That is a real and measurable opportunity cost: the bank is being asked to sacrifice its own commercial objectives to achieve a government policy goal. Regardless of the fact that this is a goal with which we all agree, we need to recognise that this is a burden on banks, even if it is in pursuit of a good objective.

Of course, banks have legal and moral obligations to help prevent criminal activity—and they do. However, we must be cautious about crossing the line between reasonable regulatory compliance and the outsourcing of state enforcement functions to private firms, without proper consideration of the attendant costs and effects that this could have.

It is also worth considering the cumulative effect. Banks are not only being asked to support fraud detection but simultaneously are dealing with sanctions enforcement and a growing raft of compliance burdens. The more we demand of banks in public service roles, the more we divert their resources away from their essential commercial purpose: financing the economy. So, while the fight against public sector fraud is essential, we must be alive to the costs that we are placing on others to carry it out.

Our Amendments 32, 38 and 54 would demand that the Minister has due regard to the costs that they are imposing on banks as a result of the exercise of their powers. We return to our core theme of proportionality: building into the Bill a regard to the cost burden on banks is a way that the imperative of tackling fraud is sensibly and responsibly balanced with the attendant costs that it imposes on private entities.

Further to this, our Amendment 33 would require the Minister to undertake a review of the costs being imposed on banks within 12 months of Clause 19 coming into effect. This amendment works alongside our Amendments 32, 38 and 54 in establishing the principle that the Minister must have due regard to the costs imposed on banks, and furthers this by demanding that the Minister undertakes a review of these costs a year after the provisions in the Bill come into force. In creating a duty to have due regard and combining it with the requirement for a review after a year, we have proposed sensible amendments which impose on the Minister an important obligation to the banks on which the Bill so heavily relies. We must make sure that, in our efforts to tackle fraud, we work alongside partners in the banking and financial sectors, not against them. These amendments will ensure that the Bill does that.

Finally, our Amendment 40 would ensure that the relevant bank is involved in determining the amount of money that it could recover to cover the costs incurred by complying with the demands under the Bill. At present, the Minister is able to unilaterally determine what a bank’s reasonable costs are. As I have outlined in my remarks, in complying with the Bill banks will incur not just an operational cost but an opportunity cost. Banks understand the complexity of their own systems; they know what it takes to divert staff from commercial roles to public service tasks. They are best placed to quantify the impact of compliance on customer service, internal risk management and technical infrastructure. To exclude them from this process of determining costs, to impose obligations without consultation or a mechanism for cost recovery, would be to create an asymmetric relationship in which the state demands and the private sector simply absorbs.

We are not asking for a blank cheque or for banks to name any figure they please, but there must be a structured and collaborative process, grounded in evidence, in which banks have a say in what their involvement truly costs and in how those costs are acknowledged and, where appropriate, reimbursed. This is therefore a sensible amendment which seeks to create that relationship between the Cabinet Office and the banks on which it relies. I hope the Government will consider it as a reasoned improvement to the Bill.

In conclusion, it is important that we do not overlook the practical realities of who is being asked to shoulder the burden of implementation. The provisions in this Bill place real and ongoing demands on the banking sector—not only in staffing and systems but in opportunity costs that affect banks’ ability to serve customers and grow the wider economy.

Our amendments do not seek to weaken the fight against fraud but to ground it in a framework of fairness, partnership and proportionality. By requiring that Ministers have due regard for the costs imposed, that those costs are reviewed and that banks have a say in assessing what they are owed, we introduce essential balance and accountability into this regime. These are moderate, practical and constructive proposals. If we are to maintain the willing co-operation of the banking sector in delivering the public good, we must also treat banks as genuine partners, not simply as instruments of policy. I hope the Government will take these amendments seriously, and I urge noble Lords to support them. I beg to move.

[Lord Vaux of Harrowden (CB)]

My Lords, I have amendments in later groups on the EVM section of the Bill with a similar effect to these, looking at the costs to the banks. This is not just about the impact on the banks, however. As many of us know from the experience of being politically exposed persons, when you put onerous responsibilities and costs on the banks that relate to a particular class of customers, you can create a disincentive for the banks to provide services to them. Most of us have probably had the experience of being PEP-ed, and it is not terribly pleasant. Here, if we are putting a load of costs on the banks that relate to benefit recipients, we make it less likely that those vulnerable people will be able to access banking services. The Government need to think about this quite carefully.

[Baroness Fox of Buckley (Non-Afl)]

My Lords, I was going to make a very similar point. We have to consider the serious consequences of the Government, in effect, turning banks into de facto government inspectors, as well as the unintended consequences such as those for politically exposed persons. Goodness knows that that has not gone well. It has created all sorts of chaos. I am very anxious about private institutions, in effect, being asked to do the Government’s dirty work in many instances.

I want to query, though, banks being able to charge for the hard work they do via new paragraph 8 in Schedule 5, in which there is a provision for the bank to be able to deduct a fee from the debtor’s account to meet its reasonable costs in complying with the order, which is a ridiculous situation. It amounts to state-backed approval of funds being taken directly from the bank accounts of private customers to deal with administrative retrieval of overpayments. By the way, the maximum amount that banks could charge would be set by the Secretary of State via regulations, which is also not reassuring. Although I do not want the banks to be used, I also do not want them to be able to charge their own clients to do the job that the Government have demanded they do. I feel very queasy about all this.

On the discrimination point, if these measures identify a range of types of bank clients who are causing more trouble than they are worth, the obvious decision will be to debank. It makes perfect sense that they would think, just like every other private sector organisation, “Do I really want people on benefits living in my house?” We have seen this discrimination time and again. There is a serious danger of unintended consequences here that the Government have to take seriously.

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[Lord Verdirame (Non-Afl)]

My Lords, I, too, have a few comments to make on these amendments. I very much support the intention behind them. I would like to understand a bit more about Clause 34 and how it will operate. Paragraph 219 of the Explanatory Notes says:

“This clause introduces a process for review of deduction orders by an authorised officer of a higher grade than the original decision maker upon application by relevant parties”.


As far as I can see, there is no mention in the legislative text of the authorised officer who conducts the review being of a higher grade. Perhaps I have missed it, and it is somewhere else; if so, I would be grateful to know where. If it is not somewhere else, it may be that the Explanatory Notes made that point on the basis of general principles of administrative law. Either way, it would be useful to know where that comes from.

My second point concerns the grounds for review, which are very narrow. Clause 34(4) says:

“An application for a review under this section may not be made on, or include, any ground relating to the existence or amount of a payable amount (unless the amount is said to be incorrectly stated in the order)”.


The grounds for appeal in the following clause are equally narrow. Is my understanding correct that the reason these grounds are so narrowly drawn is that there has already been a final determination of the payable amount by a court or tribunal—which was the reference to Clause 12 that we were given earlier on? Can the Minister give us some examples of grounds for review, given how narrowly drawn that provision is in Clause 34(4)?

Finally, I note that there is no time limit imposed on the Minister for carrying out the review. The applicant would have to put in an application within 28 days, but they might just sit and wait for the outcome of that review for an indefinite period. Would it not be a good idea to include a clear time limit on the reviewer—ideally the independent reviewer—or the authorised officer for that review to be concluded?

[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.