Public Authorities (Fraud, Error and Recovery) Bill

Lord Verdirame Excerpts

Committee stage
Monday 9th June 2025 Grand Committee

[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.

[Lord Verdirame (Non-Afl)]

My Lords, I did not speak at Second Reading, but the Bill has attracted my interest for the reasons a number of noble Lords have pointed out about procedure and due process. I share the concern about the risk of debanking en masse a group of individuals whom banks will view as not particularly good customers in terms of the money they deposit and as they now come with greater risks. I would also like to know what the Government’s thinking is on that issue.

Looking at this from the point of view of the bank, I am a bit concerned about the relationship between Clause 19(4) and Clause 19(10). Clause 19(4) says:

“The Minister may give an account information notice relating to an account only for the purpose of determining whether to make a direct deduction order in respect of the account”.


If the bank receives such a request for an account information notice, but for some reason considers there may be a different purpose in that request, what is the bank supposed to do? Clause 19(8) says:

“The bank must comply with a notice given under this section”.


However, Clause 19(4) puts a clear limit in terms of the lawfulness of giving an account information notice. Who is to assess whether there is any doubt as to the purpose of that account information notice?

In Clause 19(10), it says:

“Information given to the Minister in response to a notice under this section may be used by the Minister for the purpose of exercising the core functions but not for any other purpose”.


Of course, the core functions are wider than the purpose identified in Clause 19(4), which says that you can give an account information notice only for the purposes of determining whether to make a direct deduction order. But then, in Clause 19(10), that information may be used for wider purposes than enabling the taking of that decision.

That puts the bank in a bit of difficult position. It is told that it must comply with a notice but also that the notice must be only for the purposes of determining whether to make a direct deduction order. If it has any doubt, presumably it owes a duty to its customers and will have to consider how to behave in that situation. Further, it is also told that the information it will be providing may be used for wider purposes than simply the making of a direct deduction order. I would like to hear from the Government how they see the relationship between these various provisions in Clause 19, and where that leaves the bank in that kind of scenario.

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

My Lords, is it not always the case that you get the most difficult question just before you stand up? I am going to speak really slowly until I get a speaking note that gives me the appropriate answer.

I confirm that the Government are extremely mindful of the burdens this Bill places on business, including the banking sector. We want to ensure that it is not subject to disproportionate burdens or costs in complying with these measures. I will start by referring to the Bill’s published impact assessment, which sets out all the expected costs to businesses, including banks, of the PSFA measures. This has been green rated by the Regulatory Policy Committee and sets out the minimal expected costs to businesses where it has been possible to do so, including to banks for Part 1 of the Bill’s measures.

Throughout the development of this Bill, we have tried to strike the right balance between requiring actions from banks in a fair and proportionate way while achieving our policy intent of recouping vital public funds lost to fraud and error. This is why there has been sustained engagement with key representatives of the sector, including UK Finance, individual banks, building societies, HM Treasury and the Financial Conduct Authority. Some of this is reflected in government amendments that we will discuss later in Committee.

We know that the sector is supportive of the Bill’s objectives from the evidence provided by UK Finance in Committee in the other place. We have benefited from the sector’s operational insights, which have led us to table a number of amendments as a direct result to ease the implementation and delivery of the recovery powers. The PSFA and the DWP will, for their relevant measures, will continue to work closely with banks on the design and implementation of relevant measures, including consulting on relevant regulations.

--- Later in debate ---

[Baroness Fox of Buckley (Non-Afl)]

My Lords, I welcome the spirit of this group of amendments. I am not clear that I understand entirely how the independent review process might work, but I do understand the importance of having an independent review process; the case for this was made convincingly by the noble Baroness, Lady Finn.

Despite the fact that we are whizzing through these amendments at great speed, I do not think that it would be right to underestimate the huge amount of power that this Bill gives the Cabinet Office. There appears to be an atmosphere of consensual camaraderie, which it is pleasant to be involved in—it may be an atmosphere I am less used to—but I emphasise the amount of concern outside this Committee about the implications of this Bill. The people who are concerned are not all hucksters or fraudsters: they are ordinary people who have genuine fears around the possibilities of the absolutely unintended consequences of the Bill if we do not have adequate safeguards. So I am keen on anything that strengthens safeguards.

I hope, therefore, that the Government will consider these amendments seriously. I think that they are very helpful. I am particularly keen, of course, on the idea that liable persons, as they are described, deserve to have somewhere they can go to make an appeal. They deserve to know, as was suggested, that, if they have legitimate concerns, they will be heard. So much of what appears to be in this Bill happens behind the backs of liable persons, which creates an atmosphere of fear, suspicion and nervousness.

I do not think that people are just being paranoid here. Consider—this has been mentioned before and will no doubt come up again—the Horizon scandal. There is nothing more frustrating than feeling as though you have been treated badly somehow but you do not know where to go. You have nowhere to appeal to. It may be that you have a perfectly legitimate explanation for something. What we saw in Horizon was “computer says no”. What we could have here is the Cabinet Office, which has just imposed something on you, not taking any notice if you should go and complain. That is a very important part of this: people deserve to know that their concerns can be heard, and so on.

There is a danger in this discussion sometimes. I fear that, if one raises concerns about this Bill, there will be an inference that one is not taking fraud seriously. That is absolutely not the case. I have constantly made the point, for example, that I worry about the conflation of error and fraud. This does not mean to say, though, that, where there is genuine fraud, we should not want to clamp down on it as hard as we can.

But it is also fair enough that we need to have a system in which there is public confidence. To clamp down on fraudulent activity, we need a watertight, safeguarded Bill that targets fraud and does not pick up any number of non-fraudulent issues, which will undermine public confidence. The intention of these amendments is to help enhance public confidence that there is a mechanism through which an independent body can review a process that could be corrupted inadvertently by a department having the capacity to mark its own homework, and, in that instance, not always see the wood for the trees when people raise concerns.

[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.