Public Authorities (Fraud, Error and Recovery) Bill (Fifth sitting)
Mike Wood Excerpts(1 day, 4 hours ago)
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Georgia Gould (Queen’s Park and Maida Vale) (Lab)
It is a pleasure to serve under your chairship, Mrs Lewell-Buck.
Clause 13 allows the Government to use the proposed recovery powers to recover late penalty payments and associated interest deriving from the civil penalty regime that is introduced in chapter 5 and any additional relevant costs, either awarded by a court or tribunal or incurred in exercising the recovery powers. In all of these cases, money will be owed to the public purse. Once it has been recovered, it can be used for public good. If these sums were to remain unrecovered, it would not have this positive impact.
We are building strong safeguards and appeal routes into all our measures, including on the application of penalties. Decisions to impose a penalty will be taken by authorised officers, and we have discussed the training that they will have. It is also intended that the debt recovery powers will be overseen by the independent oversight mechanisms, which we will turn to later in the session. Where we are justified in using the proposed recovery powers to seek payments directly from bank accounts and pay-as-you-earn earnings, we want to be able to use them. The penalties and costs will all derive from the fraud investigations that the Public Sector Fraud Authority will carry out.
Clause 14 restricts when chapter 4 recovery powers can be used to recover penalties. They can only be used when the timeframe for appealing a penalty has passed without any appeal being bought or any appeal against the penalty has been finally determined by a tribunal. Penalties are issued for important reasons to encourage compliance and to help make the whole Bill work effectively, and to help make the PSFA effective in its efforts to tackle fraud against the public sector.
Penalties are not something that can be put into the back of a drawer and forgotten about. Fraud is an expensive business for Government. It costs us money when people defraud us. It costs us money to investigate, to take proceedings through courts and to pursue recovery. It is not fair that these costs are shouldered by law-abiding citizens. It is right that those who do not follow correct procedures are penalised and have to pay.
Clauses 13 and 14 enable us to hold debtors to account, driving up recovery of what is owed by letting us use the recovery powers in a wider but proportionate manner and with the appropriate safeguards and appeal routes in place. However, this has to be done with respect of due and proper process, which is exactly what this clause mandates. These clauses are important safeguards that rightly prioritise the liable person’s right to appeal a penalty decision over the recovery of the penalty. It provides us with operational flexibility to recover a range of debts, driving up the value for money of our operations. I commend clauses 13 and 14 to the Committee.
Mike Wood (Kingswinford and South Staffordshire) (Con)
Clause 13 sets out that the Minister can use powers to recover amounts from a penalty, such as late payment, but also relevant costs to be awarded by a court or tribunal. Relevant costs rightly also include costs that are reasonably incurred by the Minister in exercising the powers in chapter 4.
Can the Minister share details on what this measure might include? What is reasonable and what are the expected amounts that might be recovered in this way? Does this also cover legal costs—for example, court fees and legal representation? Will it include investigatory costs, such as the use of forensic accountants or data analysts? Does it extend to administrative costs, such as the work of civil servants processing cases? How is reasonableness to be determined within these clauses? What criteria or guidelines will be used to assess whether a cost is reasonable and will there be an independent review process to prevent excessive or disproportionate costs from being been claimed? Will the affected individuals or entities have the right to challenge, at an appropriately early stage, costs that they deem to be unreasonable?
On the expected scale of the costs, do the Government have an estimate of the average cost that could be incurred and recovered under these provisions, and will there be caps or limits on the amount that can be recovered from an individual or organisation? Does the Minister expect those to vary? How will cost recovery be monitored and reported to ensure transparency?
Given the potential financial impact on those subject to enforcement proceedings, it is crucial that clear safeguards, transparency and accountability mechanisms are in place to ensure that costs remain proportionate and fair. I would appreciate further detail from the Minister about how these costs will be defined, managed and reviewed.
Clause 14 provides that the Minister can recover an amount due in respect of a penalty only when the time for appealing has passed without an appeal, or any appeal has been finally determined. We think that that is perfectly sensible and will support the clause.
Steve Darling (Torbay) (LD)
In the oral evidence, Professor Levi highlighted some powers regarding asset freezing that the police have had since 2017. I would welcome the Minister’s reflections on whether these powers could have a significant impact in this area of the law—in particular, whether they would apply to international organisations, and the impact on individuals. I think that would be helpful to the Committee.
Mike Wood
As the Minister said, clause 15 establishes that a payable amount is a recoverable amount as defined in previous provisions of the legislation, while clause 16 further grants the Minister the power to apply to the county court for a recovery order. That ensures that a recoverable amount is treated as an enforceable payment under section 85 of the County Courts Act 1984, or as if it was directly ordered by the court.
While the mechanism for recovery is now clear, there are important practical questions about its implementation. First, we would like further reassurance about the impact on the county court system. What projection have the Government made regarding the number of cases that they expect to be brought under these provisions? Given the existing backlog in county courts, what assessment has been made of the additional burden that these measures will place on the system? Has the Minister engaged with her colleagues at the Ministry of Justice and His Majesty’s Courts and Tribunals Service to ensure that county courts have the capacity and resources to handle these cases efficiently and in a timely manner?
To develop further the issue of efficiency and speed of resolution, what is the expected timeframe for these cases to be resolved once an application is made? Do the Government anticipate delays due to a high caseload in county courts, and if so, what mitigations are they putting in place to help to deal with those delays? Will the Government publish guidance or at least a framework on the expected process and timeline for obtaining a recovery order?
It is essential that these powers do not result in undue delays, excessive court burdens, or legal uncertainty for those subject to a recovery order. Further clarification from the Minister would help to ensure that this system functions fairly and efficiently—balancing the need for enforcement and fairness to the taxpayer to recover sums that are owed, with the available judicial capacity.
Georgia Gould
We have published an impact assessment. That says that with the current size of the enforcement unit, we expect there to be about eight cases, so a small number, but of course if the powers work well and we expand the unit, that will increase. As the hon. Member would expect, we have engaged heavily across Government on all these questions. The critical thing is that there is significant deterrence to having to go through a court process—in terms of the interest that is going to grow on the debt, and the fees that would be accompanied by the legal costs and other costs associated with that process. Our hope is that the majority of people will go through a voluntary process—that will be both easier and less expensive for them—and that these powers will be used primarily as a deterrent.
Question put and agreed to.
Clause 15 accordingly ordered to stand part of the Bill.
Clause 16 ordered to stand part of the Bill.
Clause 17
Direct deduction orders
Question proposed, That the clause stand part of the Bill.
Mike Wood
Clause 17 establishes that when a payable amount is recoverable, the Minister can issue an order for direct deductions from a liable person’s bank account, either through regular deductions or a lump sum payment, as she said. Clause 18 further clarifies that those deductions can be taken from any account in which the liable person has a beneficial interest. That is extremely important, given the difficulty in establishing the different networks of bank accounts that may be held, particularly in cases of serious and organised fraud. We welcome the flexibility the clause introduces.
Although the provisions aim to improve efficiency in recovering public funds, there are still questions regarding fairness, proportionality and the safeguards that are in place, starting with the definition of beneficial interest in clause 18. Clause 18(1) allows the Minister to make an order on an account that is held by the liable person and contains an amount that the Minister considers the liable person has a beneficial interest in. What criteria or evidence does the Minister expect the PSFA to use in determining a person’s beneficial interest in an account, given the complex ownership and title structures that may be in place? On the flip side of that, how will the rights of third parties be protected, particularly if funds belong to someone other than the liable person that might be held in a shared account?
That brings us to the question of joint accounts. Clause 20 assumes that a joint account is split equally between account holders unless the Minister has reason to believe otherwise. What types of evidence would be accepted to demonstrate that the liable person’s beneficial interest is different from an equal split? The Minister referred to bank statements, but would those investigating also look at legal documents or perhaps third-party testimony? Would that be appropriate in some circumstances? Will additional checks be carried out to ensure that joint account holders are not unfairly penalised for debts that might not be theirs? It is not uncommon for people in marriages or long-term partnerships to have a domestic joint account. It might well be that one of the partners in the relationship is, in practical terms, paying more into an account, but also using the account more than the other partner, despite the two names being equally on the face of the account.
Clause 21, on the notice and the right to respond, sets out the process of notifying banks and liable persons before deductions are made, and includes provision allowing them to make representations within 28 days. The clause allows the Minister to notify the bank first before informing the liable person, to prevent account closure, asset withdrawal or other measures being taken to deprive the taxpayer of the recovery of sums that might rightfully be recoverable. Can the Minister point to a precedent for that approach in other areas of law? How does that align with best practices in financial enforcement?
Although clause 21 allows the liable person to make representations to the Minister, there is not an explicit provision for an independent appeal mechanism. Is there a reason why the Bill does not provide for such a process? Would the Government consider an independent review mechanism, beyond the systematic review that is in place for the Bill, to ensure that decisions are fair and transparent and do not disproportionately affect people in individual cases?
To go back to the potential risks of financial and domestic abuse that I touched on earlier, deducting money from joint accounts could create serious risks for individuals in financially abusive relationships. What safeguards will be put in place to prevent financial hardship, particularly for vulnerable individuals who might not actually be responsible for the debts that the PSFA seeks to recover? What specialist training will staff receive to identify and mitigate the risk of financial or domestic abuse? The effectiveness of the measures will depend on strong safeguards, clear guidance and robust oversight mechanisms to ensure fairness and proportionality. I would appreciate further clarification from the Minister on those points.
Steve Darling
I rise to speak about clause 20 in particular. Liberal Democrats are heartened by clause 18, which clearly says that if there is another account the money could be drawn from, that will be utilised. However, we are particularly concerned about coercive and controlling relationships.
In my 30 years serving the people of Torbay as a councillor, I found on a number of occasions that people who are happy to conduct fraud against other parties, whether the state or other organisations, are often very happy to financially abuse their partners as well. That leaves their partners in a very vulnerable situation. I found that often the individuals affected are very trusting people who have vulnerabilities elsewhere in their lives, which would be recognised by the Department for Work and Pensions if it were supporting them.
I really want to hear from the Minister how the DWP is going to support people and be alive to the risk. It is about making sure that there is a culture of knowledge of the issue among the investigators. Although it is essential that we get the money from fraud in, we do not want collateral damage on people who have been abused.
Georgia Gould
The clause outlines the information notices that can be given to a bank, how the bank must comply, the information it must provide and how the information can be used.
To determine whether to make a direct deduction order, an account information notice or a general information notice may be given. This is crucial in ensuring that sufficient financial information is gathered to facilitate informed debt recovery decisions, thereby enabling the effective recovery of public funds. The information provided by the banks is necessary and proportionate to ensure that the liable person’s financial situation is considered before a direct deduction order is made. This approach is already used by HMRC for its comparable direct recovery of debt, and it is also requested by the DWP in part 2 of the Bill.
The information gathered will protect vulnerable people, prevent hardship and safeguard non-liable joint account holders, while acknowledging the vital need to recover public funds lost to fraud and error. Banks must comply with a notice under the clause, and may be liable to a penalty for failure to comply without a reasonable excuse—this will ensure that the measures are adhered to. Furthermore, banks are prohibited from notifying account holders that they have received a notice under clause 19, to avoid tipping off debtors and thereby prevent money from being moved from the account. Overall, the clause is necessary in furthering the effective recovery of public funds. Having outlined the key provisions in clause 19, I commend it to the Committee.
Mike Wood
Clause 19 grants the Minister significant powers to obtain financial information from banks before making a direct deduction order, including the ability to request three months of bank statements, or perhaps statements covering a longer period where specified. The power to issue an account information notice requires banks to provide statements to determine what deduction should be made, and the power to issue a general information notice requires banks to disclose an individual’s account details, balances and correspondence addresses.
Clearly, in many investigations there will be good reason why some or all of that information is necessary, appropriate and justified. Of course, some of the information will be extremely sensitive, so we need necessary safeguards and appropriate oversight to ensure that sensitive information is requested and subsequently shared only where it is directly necessary to the investigation, and where the Minister or PSFA has justifiable grounds to think either that an error is costing the public sector significant amounts of money or that there has been a case of deliberate fraud. As I said about the previous grouping, a prohibition on banks informing the liable person that an information notice has been issued is a sensible measure to prevent that person from taking action to frustrate attempts to recover money that ought to be recovered—they could, for example, empty their account before deductions could take place. In principle, we support powers designed to ensure effective debt recovery under the right circumstances and when used in the right way, but there are several concerns regarding proportionality and oversight when it comes to protecting legitimate privacy rights.
First, on the unlimited timeframe for bank statements, clause 19 states that the Minister must obtain at least three months’ worth of statements, but can request a longer period if specified in the notice. What criteria will determine whether more than three months of statements is needed? Is there a reason why no upper limit is specified within the clause on how far back those requests can go? Clearly, the further back that requests are made for a bank statement, the greater the risk that they could lead to overly intrusive requests that may not be entirely necessary for the debt recovery.
On the broad information-gathering powers, the general information notice allows the Minister to demand a full list of all accounts held by the liable person, their details and their addresses. Presumably, that is for the specific financial institution that the notice refers to. Are there any safeguards to prevent excessive or disproportionate use of those notices? Must there be a reasonable suspicion or at least a threshold to be met before those powers can be exercised? The Bill states that the Minister can only request information to exercise their core functions, but that is obviously a very broad measure so could be interpreted very broadly.
Banks would be prohibited from informing the liable person that an information notice had been issued. Although that prevents individuals from evading deductions, it means that they may be unaware of a Government investigation into their finances even after the event. Are there any circumstances in which the liable person might be informed that their financial data has been accessed—perhaps after an investigation has been closed? Does the Minister envisage any independent oversight to ensure that those powers are used proportionately?
On the burden on banks and financial institutions, on which my hon. Friend the Member for South West Devon and I have tabled amendments to be debated later in the proceedings, these powers will require banks to process and respond to Government information notices, likely adding costs and administrative burdens to those institutions. Have the Government consulted with financial institutions to assess how proportionate the kinds of requests envisaged under the Bill are, the ease or the difficulty of compliance, and the estimated cost to banks and the financial sector? During evidence last week, some financial institutions did not seem to have any idea of what scale of burden that would be putting on their members. Again, a large part of this came back to the lack of visibility of draft codes of practice.
On privacy and data protection concerns, although the Bill states that the Minister can only request relevant information, that can be interpreted broadly. What legal protections exist to ensure that financial data is accessed and used appropriately for the very narrow purposes for which these clauses are intended? Will there be an independent review mechanism to assess whether those powers are used lawfully and proportionately?
Finally, given the wide-ranging implication of the powers, further clarity and safeguards are needed to balance effective debt recovery against individual privacy rights. I would welcome further details from the Minister on those critical issues, so that we can be comfortable going forward that the wide-ranging powers that we would be granting to the Minister and the PSFA cannot be misused and that individual privacy rights will be protected and respected.
Steve Darling
I ask the Minister to reflect on how speedily the Bill is going through Parliament. As we heard from the hon. Member for Kingswinford and South Staffordshire, financial institutions are not clear about the impact on or the cost to them. When we legislate in haste, challenges will often come out of the woodwork in the longer term. In this particular area, again, the issue is about the safeguards. We assume that we are dealing with reasonable people, but we do not have to look far in international news to see what can go wrong when unreasonable people gain power.
Where are the safeguards? When holding a Minister to account, it is often assumed that the Minister will be a reasonable person. Sadly, however, in the future the Minister may not be a reasonable person, so where are the safeguards for individuals? Also, as alluded to earlier in the debate, it would be helpful to have some assurance on the banks and the impact on them.
The Chair
With this it will be convenient to discuss clause stand part and clause 23 stand part.
Mike Wood
Clause 22 outlines how much can be directly deducted from a liable person’s bank account, while clause 23 specifies the information that must be included in direct deduction orders. These provisions are central to the enforcement mechanism and yet there are many questions that remain about their practical implementation and fairness.
As we have said many times in Committee, it is very difficult to assess how the system will work without seeing a draft code of practice. As Anna Hall from the Money and Pensions Service said when giving evidence last Tuesday,
“the code of conduct will be the critical thing. One of the things is that if frontline staff are not picking up vulnerabilities, or they are not trained in how to sort out affordability, in empathic listening or in all the protocols about how to have different types of conversations with people in different types of vulnerable situations—if those things are not in place—some of the processes in the Bill will not be as effective. It comes down to the training for frontline staff, and the capacity and processes to then follow up on what has actually been disclosed, that will enable those repayment plans to be put in place before those later processes. If those are not in place, that could cause some real issues. How successful this Bill is will come down to the code of conduct, as many have said.”––[Official Report, Public Authorities (Fraud, Error and Recovery) Public Bill Committee, 25 February 2025; c. 30, Q49.]
The Minister kindly promised during earlier sessions that:
“As for the development of the codes of practice, as I hope the Committee will see today, I will refer to the measures that are to be put in the code of practice as we go through the clauses, so that we can have some discussion about that.”––[Official Report, Public Authorities (Fraud, Error and Recovery) Public Bill Committee, 27 February 2025; c. 92.]
This is another occasion where it would be helpful, as the Minister suggested, to know a bit more about the code of practice, to enable us to scrutinise the provisions better. As witnesses have said, the code of practice is key to how effective the provisions will be. The effectiveness of the Bill will depend on matters such as the training for frontline staff on assessing affordability and vulnerabilities, the processes to evaluate hardship and to create fair payment plans, and the protocols to identify and support people in vulnerable situations.
Can the Minister provide further information about the code of practice, when it will be available for scrutiny and how it will relate to those elements of these clauses? How will the direct deduction system work in practice? As I say, this is a question about staff training and decision making; it will be an operational matter rather than something that can necessarily be directed from Westminster or Whitehall, so how will staff determine a suitable recovery amount and timeline? What principles will guide repayment plans, and how will assessments be made to ensure that affordability and prevent hardship?
Without knowing those matters, it is difficult to judge the appropriateness of some parts of these clauses, because there obviously will be some vulnerable individuals who might be subject to some of the measures in these clauses. What safeguards will be in place for those who require additional support? Will special provisions exist for individuals facing mental health issues, financial abuse or crisis situations?
I turn to the limits on deduction amounts. This is an area where we think the Government are possibly not going far enough: they are setting a maximum deduction limit even when sufficient funds exist and even when the Minister is satisfied that there has been deliberate fraud and an intention to deprive the taxpayer of money that should rightfully be being spent on public purposes.
Obviously, there are some safeguards in the clauses relating to hardship and essential living costs. The legislation states that deductions must not
“cause…hardship in meeting essential living expenses,”
but just how is that hardship to be assessed? Would someone who fraudulently obtained money be allowed to retain it if they successfully argued that they would suffer hardship from repaying it, even if they were never entitled to the money in the first place? And where does that line fall? Presumably, we would not expect them to be able to retain money to allow them to lead a certain quality of life that they may be used to, but that is obviously very different to being able to pay essential bills.
Under the Bill, in cases of fraud, only 40% of credited amounts can be deducted in the relevant period. We are not sure why that cap is in place when the individual was never entitled to the money. If a person has sufficient funds and there has been a conscious—perhaps even organised—attempt to defraud the public sector, why limit recovery rather than allowing full repayment?
That brings me to amendment 19, which stands in my name and that of my hon. Friend the Member for South West Devon. It proposes removing the 40% cap to ensure full recovery under this legislation where possible and subject, obviously, to the safeguards to which I have referred—the hardship test and the independent oversight that is contained within the clauses.
Mrs Lewell-Buck, if you had defrauded the taxpayer out of £100,000—I am not for a moment suggesting that you would—and £100,000 happened to be visible within your bank account, and the Minister was satisfied that that was the result of a conscious course of action on your part to defraud the taxpayer and that there was no reason to imagine that losing it was going to cause you obvious hardship, why should you be allowed to keep £60,000 of that £100,000 in your bank account, even though the money was simply not yours? In that hypothetical situation—I ought to repeat that—it would be stolen money. It does not seem right that the legislation appears to protect 60% of defrauded money and prevents recovery through these mechanisms, so I intend to push amendment 19 to a Division. Who is subject to the safeguards in the clause? If the Government are confident that those safeguards are robust enough to apply to the first 40%, it seems that they ought to be robust enough to apply to the remaining 60% as well.
Returning to clause 22, what happens if too much is deducted? The Bill states that the Minister must not deduct more than the payable amount, which is a sensible and logical bar to set. However, what mechanisms exist to correct over-deductions? What recourse does a liable person have if an error is made and they suffer loss as a result of an over-deduction?
Neil Coyle (Bermondsey and Old Southwark) (Lab)
Is the shadow Minister suggesting a level of deductions that is acceptable? The amount that the Department for Work and Pensions can claim back has fluctuated in recent years. Are the Opposition proposing a level at which that threshold should be set?
Neil Coyle
I am not talking about the amount for those who have committed fraud but for the second group that the shadow Minister mentioned, where there perhaps has been a mistake.
Mike Wood
In the case of non-fraudulent claims, where the Minister is not satisfied that there has been fraud on the part of the liable person, I would be inclined to go with the Government’s figure of 20%. That is reasonable in the case of errors, and it obviously allows for longer-term recovery where a genuine mistake has been made. Where there is deemed to have been fraudulent activity, it does not make sense to give those responsible the protection of protecting 60% of the money that they have stolen.
Neil Coyle
Is the shadow Minister’s other concern, with those who have committed fraud, that he thinks the payment should be faster? The Bill allows for 100% of this falsely claimed sum to be recouped, but he seems to be suggesting that he would like to see that done faster. Is that the nature of the amendment?
Mike Wood
Obviously, the Bill allows for sums to be recouped through regular earnings. Where money is in a bank account, we have established that the money is there from the information notices and other measures in the Bill. If the full amount that has been defrauded is available within the account, it seems to make little sense not to be able recover that sum from the account, rather than relying on a deduction of earnings order.
Clause 23(5) requires banks to comply with direct deduction orders. Have the financial institutions been consulted on those obligations and are they content with them? As was said earlier, the evidence that we heard last Tuesday suggested that many financial institutions did not seem to have a grasp of what those obligations and burdens might look like, as well as the costs that would arise.
To conclude, the effectiveness of these provisions will depend heavily on the codes of practice on staff training and on fair procedures. Further clarification is needed to ensure deductions are proportionate, transparent and do not cause undue hardship, particularly in cases of fraud and financial vulnerability. But where there has been demonstrable fraud, the Opposition see no reason to protect 60% of credit in a bank account where it may be linked to conscious efforts to defraud the taxpayer. I would welcome the Minister’s response to those concerns.
Georgia Gould
I welcome the opportunity to respond to the amendment and to clarify an error that I made in a previous discussion that might have contributed to some confusion. When I talked about the recovery of debt and a limit to the amount that will be recovered, I mentioned up to 40% of assets when I meant to say credited amounts. To be clear, in the instance that the shadow Minister mentioned—say the Member for Kingswinford and South Staffordshire defrauded the Government, they had £200,000 in their account and it was a lump sum, the powers would enable the PSFA to recover that money, with the safeguards of not leaving that person in financial destitution. The 40% is related to ongoing repayments and the speed of repayment. I hope that that gives some reassurance to the hon. Member.
To the points that Opposition Members have made about vulnerability and training, the PSFA authorised officers will be highly trained. They are subject to professional training and a code of ethics within that. That includes the kind of professional curiosity that the hon. Member for Torbay talked about. On debt recovery, they will work to establish debt practice, including the debt management vulnerability toolkit, which is publicly available. I would be pleased to send him those documents so he can understand the vulnerability assessments that will be made and scrutinise them.
To go through the detail of the clauses, specifically for a regular direct deduction order, the total deductions in a 28-day period must not exceed either 40% or 20% of the amount credited to the account in the relevant period: for fraud, 40% is the maximum; for error, the maximum is 20%. Throughout the Bill, we have sought to bring powers that are used elsewhere into the PSFA, not to create brand new powers for the PSFA. This provides assurance of their effective and proportionate use, and we are doing the same here. The 40% maximum limit is in line with existing legislation, such as the DWP’s existing direct earnings attachment powers and the Child Maintenance Service deduction from earnings order powers.
Mike Wood
I thank the Minister for giving us some clarification on that, but the direct deduction is different from an earning attachment where there is likely to be another similar amount coming in the following month. The Minister suggested I might have £200,000 in my account, which I think would raise a few eyebrows all around. But if all £200,000 had been the result of fraud from the public sector, and I chose to put that regular direct deduction order in place, my understanding of clause 22(3) is that in the first month the maximum that could be deducted would be 40% of £200,000—which is £80,000.
Georgia Gould
First, I want to make absolutely clear that I was not accusing the hon. Member of any fraud, but just using a hypothetical. In that instance, the PSFA would use the lump sum direct deduction orders, so they would be able to take the full amount. They would not need to use the direct earnings attachment. It would be a lump sum direct deduction order that would recover that money. As I said, there are no limits to that, except that it does not cause hardship in meeting essential living expenses. I hope that provides some reassurance.
The 40% maximum limit is in line with existing legislation. The amendment seeks to remove the 40% cap for fraud, allowing a higher percentage of regular deductions to be made. To be absolutely clear, for lump sum direct deduction orders, there is no maximum limit on the total amount of deductions. However, the lump sum deduction must still adhere to the core principles, in meeting essential living expenses and be otherwise fair. That ensures that where a higher proportion of the payable amount is present in the account, we can recover the debt more efficiently while maintaining those key safeguards.
We are also able to issue a lump sum direct deduction order and then establish a regular direct deduction order. That allows us to take an initial higher amount of deduction, with regular payments thereafter where appropriate. This is a better route than allowing for a higher level of deductions. It builds on established practice, is proportionate while still being impactful, and it limits the disincentive to earn that an unlimited regular deduction would create. A too-high regular deduction would disincentivise earnings so strongly that it would result in slower, not faster, recovery of funds for our public services.
I turn to clause 22, which sets out the amount of deductions that there may be under an order. We have ensured that the amount of debt we collect at any given time is fair. That is why we established maximum limits based on whether debt was accrued due to fraud or error. We have discussed the safeguards and precedent at length, and the powers here build on precedent across Government. A key consideration throughout the creation of the debt measures was to robustly prevent hardship, learning from best practice. The challenge was to balance that with the need to send a strong deterrent message to those who have the means to pay their fraud and error-related debt to Government, but refuse to do so.
Clause 22 caters for that by ensuring that the terms of the order will not cause the liable person, any other account holder, or a person living with or financially dependent on the liable person or any other account holder, hardship in meeting essential living expenses. To ensure we include other considerations outside of this list, the terms of the order are also required to be otherwise fair in all circumstances.
Clause 23 provides the contents and effect of direct deduction orders. Regular and lump sum direct deduction orders must specify the amount, or a method for calculating the amounts, to be deducted and when. A regular deduction may specify different amounts or different methods to be deducted at different times. For example, the first deducted amount may be higher than the following payments to recover the debt in the most efficient way possible. Deductions may not be made until 28 days after an order has been made. That provides a safeguard for the liable person, allowing them the requisite time and opportunity to request a review under clause 45. Banks must comply with the direct deduction order, whether regular or lump sum, to ensure adherence to these measures. A penalty may be imposed for failure to comply under clause 53.
Clauses 22 and 23 send a strong message to those with fraud and error-related debt to the Government, while preventing hardship and protecting those who are vulnerable. They play an essential role in the operation of a direct deduction order and align with the core principle of seeking the effective recovery of public funds.
I have set out the powers that are available under the Bill, but as I said earlier, they do not prevent the Government also being able to use powers that are already available, such as applying to the courts to seize assets. Having outlined the key provisions in clause 22 and 23, I commend both to the Committee.
Mike Wood
Given the Minister’s reassurances, I will not press amendment 19 to a Division now, but we may wish to come back to the matter on Report. I beg to ask leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Clauses 22 and 23 ordered to stand part of the Bill.
Clause 24
Bank’s administrative costs
Question proposed, That the clause stand part of the Bill.
The Chair
With this it will be convenient to discuss the following:
New clause 6—Report on cost implications for banks—
“The Secretary of State must, within three months of the passing of this Act, publish a report on the expected cost implications of the provisions of this Act for banks.”
Amendment 23, in clause 103, page 63, line 35, at end insert—
“(3A) Before bringing into force any of the provisions of Part 1 of this Act, the Secretary of State must consult with banks as to the costs which will be incurred by banks upon application of the provisions of Part 1.
(3B) Where consultation finds that the expected costs to banks are at a disproportionate level, the Secretary of State may not bring into force the provisions which are expected to result in such disproportionate costs.”
Georgia Gould
Clause 24 enables a bank to deduct administrative costs that it has reasonably incurred when complying with a direct deduction order from the liable person’s account. This provision is essential to ensure that banks are adequately compensated for the administrative efforts required to comply with the orders, thereby facilitating the efficient operation of debt recovery processes while protecting account holders from undue financial strain. A direct deduction order will then specify how the bank can deduct its administrative costs while complying with the maximum amount of total deductions as specified in the clause 22.
Clause 37 contains a power to make further provision through regulations as to the administrative charges which can be imposed by the banks. That power will be used to introduce a cap on the charges which can be imposed under this clause and which can be adjusted in line with inflation and to ensure that the charges remain reasonable at all times. The amount may be deducted by the bank immediately prior to the direct deduction order. To safeguard against that causing unintended hardship, the question of deducting the bank’s administrative costs for the liable person must be taken into account when complying with the hardship considerations outlined in clause 22. That will ensure that the direct deduction order and deduction of the bank’s administrative costs do not cause the liable person, other account holders, those living with the liable person or joint account holder or those financially dependent on the liable person or joint account holder hardship in meeting essential living expenses and that the deductions are otherwise fair in all circumstances.
Regarding the burdens on the financial services sector, the Government are extremely mindful of the burdens that the Bill places on industry, including financial institutions. We want to ensure that banks are not subjected to disproportionate burdens or costs in complying with these measures. As I have outlined, that is why we met with key representatives of the finance industry, including UK Finance, individual banks, building societies and the Financial Conduct Authority, to ensure that there is close and sustained engagement on this Bill. We heard directly from UK Finance in evidence last Tuesday. The finance sector has supported the Bill’s objectives and there are constructive conversations already taking place. The direct deduction order powers in this Bill align with those existing powers and we will continue working with the DWP to align direct deduction order processes across both Departments where possible to simplify implementation.
Mike Wood
As the Minister said, the clause allows for deductions from a liable person’s account to include reasonable costs incurred by the bank in processing the deduction order. While the clause will ensure that banks can recoup legitimate administrative expenses, several important questions arise about fairness, oversight and overall financial impact.
Georgia Gould
The clause sets out the action to be taken if the amount in the account is lower than the amount specified in the direct deduction order. Should that situation arise in relation to a lump sum direct deduction order, no deduction is to be made by the bank, and the bank must notify us as soon as possible. If it occurs in relation to a regular deduction order, the order is to be read as requiring the deduction to be made on the same day the following week. If the amount in the account still remains lower, no deduction is to be made and the bank must notify us as soon as possible. That approach ensures that individuals are not unduly penalised or driven into financial hardship because of insufficient funds, while maintaining the integrity of the debt recovery process through prompt communication and reassessment. Having outlined the key provisions of the clause, I commend it to the Committee.
Mike Wood
The clause outlines the procedure when a bank account does not contain sufficient funds to fulfil a direct deduction order. The key provisions are as follows. For lump sum deduction, if the full amount is not available, no deduction is made and the Minister is notified. For regular deductions, if the necessary funds are not available, an attempt is to be made again on the same day the following week. If funds remain insufficient, no deduction is made and the Minister is notified.
I have some key questions and concerns as to what happens next. Once the Minister is notified, what are the next steps? Does the notification trigger further action to recover the money through other means? Is there a set timeframe in which the Minister must decide on further steps? Does the Minister have discretion to determine the best course of action, or are there prescribed steps that must follow? If funds are unavailable in the specified account, is there a process to check whether the liable person has other accounts in their name with other financial institutions that may have sufficient funds? Would the Minister have the power to issue a further general information notice to a bank in order to identify other accounts that could be used for recovery?
Georgia Gould
Direct deduction orders will be an effective tool in recovering money owed to the public sector. However, it is important that we include measures in the Bill to make clear the obligations of banks and account holders with regard to the orders.
Clause 26 introduces restrictions on accounts from the perspective of banks. The bank must ensure that the account is not closed at the request of the account holder. If the notices relates to a lump sum direct deduction order, the bank must also secure that no transactions occur that would reduce the balance below the amount specified on the order, or the bank may transfer the specified amount, or the amount in the account if it is lower, into a hold account created by the bank to protect it. The bank must ensure that no transaction occurs that would result in the hold account’s balance falling below the amount transferred into it. When a bank transfers an amount into a hold account, it must ensure that in doing so, it does not cause any disadvantage to the liable person or any account holder. These provisions are essential and are a key safeguard to ensure that funds required for recovery are preserved while also protecting account holders from any disadvantage, thereby maintaining trust and fairness in the enforcement process.
Clause 27 imposes restrictions on account holders to prevent them from taking any action that may frustrate the effect of the first notice or direct deduction order, which the shadow Minister raised concerns about. To clarify, frustrating the effect of the first order in this context means frustrating the effect of the proposed direct deduction order, the terms of which are set out in the first notice. Frustrating the effect of the first notice or the final direct deduction order might include a liable person creating a new bank account in order to redirect the payment of their salary, or the liable person falsifying the extent of their protected essential living expenses.
These restrictions are vital to ensure that funds necessary for debt recovery are not deliberately concealed or moved, thereby upholding the fairness and integrity of the public fund recovery system. They are also balanced within the wider direct deduction order measure, which includes review and appeal rights that are also intended to be subject to independent oversight, to be discussed later. Should a person frustrate the effect of the first order or direct deduction notice, a trained authorised officer may decide to impose a penalty under clause 53.
Mike Wood
Clause 26 places significant responsibilities on banks once a direct deduction order has been issued. The bank must ensure that the account is not closed while a deduction order is active, prevent transactions that would reduce the balance below the required deduction amount—for example, the transfer of funds—and ensure that these actions do not cause disadvantage to the liable person.
I have a few questions about those responsibilities. How are banks expected to assess disadvantage or hardship, based on what is likely to be very limited information available to them about their account holders? What guidance or criteria will be provided to banks to determine what constitutes a disadvantage to the liable person? How can banks assess the potential immediate impact of blocking transactions, including preventing spending on essentials—for example, food or utility bills—and any consequences that might arise from that? How will they consider longer-term financial obligations, such as rent or mortgage payments, disruption to which could cause significant hardship?
The lack of a code of practice makes it difficult to properly scrutinise these measures. The code of practice is expected to provide crucial details on how banks should balance enforcement with protecting individuals from undue harm, but we will have to wait until after we have made decisions in Committee and in the Bill’s remaining stages to see it. It would be helpful if the Minister could clarify how these concerns will be addressed in the code of practice and provide as much specificity as possible.
Clause 27 states that account holders must not take actions that frustrate the direct deduction process, such as closing the account, moving funds elsewhere to evade the deduction or engaging in other actions that undermine the effectiveness of the recovery process. The matter of penalties for non-compliance needs to be looked at carefully. What penalties will be imposed if an account holder deliberately frustrates the deduction order? Would non-compliance be treated as a civil offence, or could it lead to criminal penalties in cases of deliberate obstruction? If the financial institution failed to prevent it, would that be a civil offence, or would it be seen as a regulatory issue?
Is there an appeal mechanism if an account holder can prove that a transaction was necessary and not an attempt to evade the deduction? For example, what would happen if someone urgently needed to pay rent or buy medicine and did not realise it would interfere with the deduction order? Would there be any flexibility in cases of financial difficulty, and how would that be assessed?
Given the significant responsibilities placed on banks and the potential impact on individuals, further clarity is needed on how banks will be guided in assessing disadvantage and hardship, how the code of practice will address these concerns and ensure practical implementation, what penalties will apply if an account holder frustrates the deduction process or if a financial institution fails to prevent such frustration, and what appeals or exceptions exist for necessary transactions that unintentionally interfere with the deduction order. Those clarifications are essential for ensuring that the system is both effective and fair.
Georgia Gould
It is important to set out again that these powers will be used in the last instance and, in many cases we hope they will be a deterrent. In the majority of cases, we expect people to engage with the authorised officers and come to a voluntary agreement. If people do not agree, the powers will be used only after an application to a court to determine the ability to recover that debt. In the first instance, we expect these powers to be used in a very limited fashion; the impact assessment talks about fewer than 10 cases a year. There is ample time to work through with banks how these powers are used and ensure that it is proportionate.
The shadow Minister raised concerns that the powers are too harsh in some cases and that they will leave people vulnerable in others, which shows the balance involved. The measures have been carefully thought through, and they include safeguards for vulnerability but also the ability to step in if people are deliberately frustrating the process.
We will issue guidance to banks on how the three months of bank statements will be determined, and authorised officers will work with banks to ensure that this works effectively. The shadow Minister asked about the penalty. It will be a £300 fixed penalty notice for failing to comply. As with every part of this, people will be able to request a review and, ultimately, to appeal.
Question put and agreed to.
Clause 26 accordingly ordered to stand part of the Bill.
Clause 27 ordered to stand part of the Bill.
Ordered, That further consideration be now adjourned. —(Gerald Jones.)
Public Authorities (Fraud, Error and Recovery) Bill (Third sitting)
Mike Wood ExcerptsThursday 27th February 2025
(6 days, 4 hours ago)
Public Bill CommitteesRead Full debate Public Authorities (Fraud, Error and Recovery) Bill 2024-26 View all Public Authorities (Fraud, Error and Recovery) Bill 2024-26 Debates Read Hansard Text Read Debate Ministerial Extracts Amendment Paper: Public Bill Committee Amendments as at 27 February 2025 - (27 Feb 2025)
The Parliamentary Secretary, Cabinet Office (Georgia Gould)
It is a pleasure to serve under your chairship, Mrs Lewell-Buck. I look forward to constructive dialogue with the Committee throughout the day.
As the Committee is well aware, fraud against the public sector takes money away from vital public services, enriches those who seek to attack the Government, damages the integrity of the state and erodes public trust. The Bill makes provision for the prevention of fraud against public authorities by the recovery of money paid by public authorities as a result of fraud or error, and for connected purposes. Under part 1, the Bill authorises powers that will be used by the Public Sector Fraud Authority, part of the Cabinet Office, and under part 2, by the Department for Work and Pensions, on which the other Minister in Committee, the Parliamentary Under-Secretary of State for Work and Pensions, will lead.
I will now consider clauses 1 and 2 together. Clause 1 gives new core functions to the Minister for the Cabinet Office and sets out what can be recovered by the use of the powers under part 1 of the Bill. It describes what the Government want to achieve with part 1: to investigate more public sector fraud; to get back funds lost to the public purse through that fraud; to take enforcement action against fraudsters, whether through civil or criminal routes; and to support public authorities to prevent and address fraud against them.
The functions of the powers under part 1 will be used to deliver. As such, it is necessary that this clause stands part of the Bill. The functions are given to the Minister for the Cabinet Office, but it is important to stress that that is drafting convention, and the Minister will not use the powers personally; instead, in line with the Carltona principles, later clauses set out that the decisions may be taken and powers utilised by authorised officers and authorised investigators appointed by the Minister. Those officials will sit within the Public Sector Fraud Authority and will be experienced investigative professionals trained to Government counter-fraud profession expectations, sitting in a structure led by senior counter-fraud experts. As we heard from the witnesses, that will sit within a system of oversight, to be discussed later in the Bill.
The clause also sets out what “recoverable amounts” are. First, that means payments made as a result of fraud or error that have been identified during the course of a fraud investigation to be either fraudulent or erroneous, and which the affected public authority is entitled to recover. Later clauses cover how that entitlement is established. Error as well as fraud is included here, because if an investigation discovers that there has not been fraud, but none the less that a person has received money that they should not have, the debt powers in the Bill can, if necessary, be used to recover it. That is in line with the approach taken by others, including His Majesty’s Revenue and Customs and the DWP, but it is important to stress that the core function of the powers is to investigate and recover losses from fraud. Recovery in that way will normally be when alternative voluntary routes have been exhausted, or a person or business can repay but is refusing to do so. All attempts will be made to engage.
Secondly, “recoverable amounts” covers any other amount that a public authority is entitled to recover in respect of that fraud. That covers frauds where no payment has been made, but the fraudster has benefited in some other way—for example, fraudulently not paying what they owe—and the value of that can be determined. Finally, it also includes any interests which would be collectable in those circumstances.
Clause 2 sets out how the Minister for the Cabinet Office can carry out the functions in clause 1. The clause excludes HMRC and the DWP from the list of bodies that the PSFA will be able to take this action for as they both have significant resources and expertise in this area, as well as their own powers. Again, we will discuss that later.
Importantly, the clause does not remove or supersede responsibilities and functions that other public authorities may have in respect of fraud and the recovery of money. The powers in this part allow the Government to fill a gap and complement what already exists. The intention is that, in exercising these functions, the Minister, and the authorised officers and investigators who will use the powers on behalf of the Minister, are not simply moving investigations and recoveries that would happen anyway into the Cabinet Office. Instead, they will primarily use them in a way that is additive, to take on investigations, recover money and take enforcement action that would otherwise not have been done.
Subsection (3) says that the Minister may charge “a fee”. The PSFA does not currently charge for its investigative services, but that gives it authority to do so in the future, consistent with the cost-recovery approach set out in HM Treasury’s “Managing Public Money” guidance. “Public authority” has a broad definition set out in clause 70 and would include, for example, other Government Departments, arm’s length bodies and local authorities.
Clause 2(4) says that the Minister is included in the definition of public authority in clause 70 as far as that concerns fraud or suspected fraud against the Minister, or recovery of money for the Minister. That is to ensure that frauds against the wider Cabinet Office and its agencies and bodies can still be investigated by the PSFA. However, to ensure that there is no conflict of interest, it will be set out in guidance that the PSFA will not investigate alleged frauds within the PSFA or allegations against the Minister personally but will refer those to another agency as deemed appropriate on a case-by-case basis. That will help to ensure the integrity of PSFA investigations by keeping responsibility for investigating fraud in the PSFA, or by the Minister, external to that function, to preserve appropriate independence.
Finally, subsection (5) ensures that, in giving Ministers these functions, this part does not affect a public body’s entitlement to recover an amount or any functions it has in respect of fraud or recovery. That means existing functions and powers are not taken away from public authorities or superseded by the Ministers’ functions.
Mike Wood (Kingswinford and South Staffordshire) (Con)
His Majesty’s Opposition agree with the Bill’s principles and support the Government in what they are seeking to do, but we will be using our best efforts to try to help them do it better where we can. As the Minister said, clause 1 sets out the functions. Those functions seem perfectly sensible and reasonable, as does the way in which the Minister for the Cabinet Office is to interact with other public authorities as set out in clause 2. One of the themes that runs throughout almost all clauses of the Bill is the issue raised by multiple witnesses on Tuesday about how the functions to be allocated to the Minister or their representatives are to be exercised within the various codes of practice provided for in the Bill.
On Tuesday, the Minister seemed to indicate that the Government intend for those codes of practice to be made available for the House of Lords to scrutinise, but not for the House of Commons. That obviously makes it much more difficult for the Committee to consider the appropriateness of those functions and the various powers in the Bill. I urge the Government again to reconsider and look at how the House of Commons can be given those chances before our House completes its consideration. We recognise that that will not be possible in Committee.
In August 2022, the previous Conservative Government established the Public Sector Fraud Authority within the Cabinet Office. We welcome the Bill taking that work forward by establishing the PSFA as a separate body from the Cabinet Office, to which the Cabinet Office is able to transfer functions. We entirely support the Government’s efforts to tackle fraud and error.
The National Audit Office puts the amount lost by fraud and error in the range of £5 billion to £30 billion in 2023-24, so ensuring that the Bill works to tackle both error and fraud is crucial within the functions set out in clause 1, and we will come on to that with some of our amendments to later clauses. Equally, we wish to ensure that the functions assigned to the Minister for the Cabinet Office are proportionate and capable of independent review and oversight. We will return to these important issues with our amendments later on.
I would like to ask the Minister some questions on clauses 1 and 2, the first of which is about the definitions. The Bill does not provide definitions of “fraud against a public authority” or “error”. As we heard in evidence on Tuesday, Dr Kassem from Aston University stated that
“the definition of fraud can be a bit limiting in the current Bill, because, first, it assumes that fraud is happening for financial reasons when that is not necessarily the case. There are non-financial motives. Let us consider insider fraud—fraud committed by insiders, people working for the public authorities—which is one of the most common threats not just in the public sector, but across other sectors. A disgruntled employee can be as dangerous as someone with a financial motive. So I would stick with the Fraud Act 2006 definition of fraud, because it mentions personal gain full stop. It can be financial and it can be non-financial. That has to be clarified.”––[Official Report, Public Authorities (Fraud, Error and Recovery) Public Bill Committee, 25 February 2025; c. 6, Q3.]
Really, it must be clarified within the functions set out for the Minister for the Cabinet Office. Why should that not be the case, and how does the Minister define these things for the Bill, if it is not in line with the Fraud Act 2006? Clause 2(3) also states:
“The Minister may charge another public authority a fee in relation to the exercise of functions under this Part on behalf of, or in relation to, the public authority.”
Can the Minister clarify what we would expect that fee to be? Is it arbitrary or a set amount? Does the Minister decide or is there a particular process?
I would also like to ask the Minister about the amounts that the Government expect to recover under the Bill. According to its impact assessment, the powers in part 1 are estimated to lead to around £54 million—the best estimate for net present benefits—being recovered from public sector fraud over 10 years. Can the Minister reassure the Committee how robust that estimate is, what it is based on and how confident the Government are that the full amount of money will be recovered?
The reason I ask that is because, for the Government across the 10 years, the best estimate for fraud recovered minus costs is £23 million. Different numbers of cases could mean a loss or a slightly higher return, which could be between minus £1.5 million and £24 million. How will the Government ensure that the Bill recovers more money than is paid out in costs in administering its functions? As clauses 1 and 2 are the foundation for establishing the PSFA, the Opposition are content for them to stand part of the Bill.
Georgia Gould
I thank both hon. Members for their constructive comments. This dialogue will be really important in scrutinising the Bill. I also welcome the support for action on fraud, and the acknowledgment that it is a significant issue.
On timing, I reassure the hon. Member for Torbay that the powers in the Bill that the PSFA is asking for are all powers that exist elsewhere in government. They have been used and tested; they are just being brought into a new context. At the moment, there are few powers to investigate or recover fraud that happens to the wider public sector, but this part of the Bill seeks to rectify that. There has been a great deal of consultation led by me, the Under-Secretary of State for Work and Pensions and our teams to get us to this point, but we will engage constructively with scrutiny as we move forward.
On the cost-benefit analysis, the overwhelming message from witnesses was that these new powers are necessary because there is a gap in investigating and recovering fraud against the wider public sector, and that the Bill will make a difference.
On the question of the £54 million and whether that is robust, that is a modest amount given we know that at least £3 billion of fraud happens against the wider public sector. It has come about through a great deal of work from the PSFA in modelling forward the current size of the enforcement team and how the powers are used elsewhere. We can therefore be confident in that figure, but if the powers work well we could grow the capacity and potentially recover more fraud.
At the moment, we know that there is fraud going on that the Government cannot investigate. A big part of this will be the deterrent and making it clear that if there is fraud in procurement or grants, there will be real powers to investigate and recover that money. That is really important both for the concrete recovery of money and for trust in how public funds are spent.
On the wider points about the importance of oversight, including of the Bill, that has been incredibly important to the Government. We thought deeply about the measures in the Bill and we will discuss that as we go through it. As for the development of the codes of practice, as I hope the Committee will see today, I will refer to the measures that are to be put in the code of practice as we go through the clauses, so that we can have some discussion about that.
I reassure the Committee that the definition of fraud in clause 70 is as it is defined in the Fraud Act 2006. That includes the main fraud offences, which are false representation, fraud by failure to disclose information when there is a legal duty to do so, and fraud by abuse of position. Hopefully that provides reassurance on that question, and I look forward to answering any other questions.
Question put and agreed to.
Clause 1 accordingly ordered to stand part of the Bill.
Clause 2 ordered to stand part of the Bill.
Clause 3
Information notices
The Chair
With this it will be convenient to discuss the following:
Amendment 10, in clause 3, page 2, line 36, at end insert—
“(1A) The Minister has reasonable grounds to suspect a person has committed fraud against a public authority if—
(a) there is an objective basis for the Minister’s suspicion based on facts, verifiable information or intelligence, and
(b) a reasonable person would be entitled to reach same conclusion based on the same facts, information or intelligence.
(1B) The Minister does not have reasonable grounds to suspect a person has committed fraud against a public authority if the Minister’s suspicion—
(a) is based in any way on—
(i) the person’s physical appearance,
(ii) any protected characteristic under the Equality Act 2010 that a person may have or appear to the Minister to have, or
(b) is based solely on any generalisation or stereotype giving rise to a belief that certain groups or categories of people are more likely to be involved in criminal activity.”
Amendment 14, in clause 3, page 3, line 10, delete “10” and insert “28”.
Amendment 9, in clause 3, page 3, line 30, at end insert—
“‘reasonable’ means the Minister must have formed a genuine suspicion in their own mind, and the suspicion that fraudulent activity has taken place must be reasonable. This means that there must be an objective basis for that suspicion based on facts, verifiable information and or intelligence which indicate that fraudulent activity will be found, so that a reasonable person would be entitled to reach the same conclusion based on the same facts and information, and or intelligence.”
Mike Wood
Clause 3 would give the PSFA the power to issue information notices to a third party, compelling them to provide information within a deadline. The amendments set out the circumstances in which that would be done and set what we think is a perfectly reasonable test of reasonableness, as well as exploring the time provided for the recipients of notices to respond. Our amendments are designed to probe some areas of this process. The powers given to the Minister for the Cabinet Office in clause 3 are wide-ranging, so we wish to ensure that these are used reasonably and proportionately, and solely in connection with the explicit purpose of the Bill. We have tabled amendments 11, 10, 14, and 9 to that end.
We have to remember that the powers can be used against individuals and small businesses. While we might expect most of the notices to be issued against multinational companies, particularly financial institutions, we also need to consider those who do not have the capacity of larger organisations. The powers must be used reasonably and effectively in all circumstances.
Amendment 11 sets a reasonableness test relating to whether the information being requested is likely to relate to the fraud in question—for example, in private text messages—and therefore whether it is reasonable to ask for that information, and whether the cost involved in recovering the required information is likely to be reasonable and proportionate. The Minister referred to equivalent powers that are available in other forms of investigation that the Government and their agencies and bodies carry out. We see the reasonableness test as equivalent to that which HMRC must meet in its notices.
We also wish to ensure that the powers are not misused, and amendments 9 and 10 are directed towards that purpose. Although clause 3 states that the Minister can use the powers only against someone
“whom the Minister has reasonable grounds to suspect has committed fraud against a public authority”
the Bill provides no definition of “reasonable”, so amendments 9 and 10 are designed to fill some of that gap.
Amendment 10 specifies that the Minister for the Cabinet Office
“has reasonable grounds to suspect a person has committed fraud against a public authority if…there is an objective basis for the Minister’s suspicion based on facts, verifiable information or intelligence, and…a reasonable person would be entitled to reach same conclusion based on the same facts, information or intelligence.”
We want to be clear about what we do not think are reasonable grounds. These would include, for example, if the Minister’s suspicions were based in any way on a person’s physical appearance—protected characteristics under the Equality Act 2010 that the person may have, or appear to the Minister to have—or were based solely on any generalisation or stereotype giving rise to a belief that certain groups or categories of people are more likely to be involved in criminal activity. We want to ensure that the powers are exercised responsibly and appropriately.
Amendment 9 gives the definition of “reasonable” as meaning that
“the Minister must have formed a genuine suspicion in their own mind, and the suspicion that fraudulent activity has taken place must be reasonable. This means that there must be an objective basis for that suspicion based on facts, verifiable information and or intelligence which indicate that fraudulent activity will be found, so that a reasonable person would be entitled to reach the same conclusion based on the same facts and information, and or intelligence.”
Amendments 9 and 10 are based on the reasonable grounds for suspicion that are contained in the PACE—the Police and Criminal Evidence Act 1984—code A.
Bearing in mind that these powers will be exercised against individuals, some of whom might struggle to provide information, we want to probe the choice of 10 days as the timeframe in which to provide information. Amendment 14 increases the minimum notice period from 10 working days to 28, which is similar to the standard minimum time that people would expect to be given to respond to written requests for information from HMRC. Given the scope of the information that might be requested, appropriate time must be given to organisations and individuals to comply. External circumstances should also be taken into account when considering the time periods. If an individual is on annual leave or off sick for a few days, they may have less than a week to provide the information or they will face significant fines. That does not seem reasonable.
We are not necessarily saying that 28 days is a better time period than seven, but I would be grateful if the Minister explained why the Government set the minimum time that they did. That is particularly pertinent, as failure to provide the information required would carry a civil penalty of £300 a day, which, for an individual, can amount to a considerable sum of money very quickly.
In its current form, without being more specific about what it means to be “reasonable” or expanding the timeframes, we are a little concerned that the powers that clause 3 gives the Minister may not include the necessary checks and balances, so I would appreciate her reassurances on that point.
Steve Darling
Perhaps the word that the shadow Minister used most was “reasonableness”. In our strange political world in recent months, the question of what is reasonable in our society has changed significantly following the change of President in the United States. What normal society would expect is “reasonable” of an elected official, both here and in America, gives me, as a Liberal Democrat, cause for concern in relation to how we can make sure that a Bill like this, which gives very significant powers to the state, sets safeguards in stone to protect our communities. We will come to that later, but I would welcome reassurance from the Minister. Although I am sure that we are all reasonable people in this room, others who are unreasonable might take power at a later stage of our lives. With this legislation, how can we put safeguards in place? I hope that we will cover that later, but the Minister’s early thoughts would be welcome.
Georgia Gould
Yes, the code of practice will be much more operational guidance that will be targeted at the authorised officers and their day-to-day operational practice. It will include the information that I have set out.
The Chair
Does the shadow Minister wish to press amendments 10, 14 or 9, which were just debated, to a vote?
The Chair
With this it will be convenient to discuss the following:
Amendment 16, in clause 4, page 3, line 36, leave out “Minister” and insert “First Tier Tribunal”.
Amendment 17, in clause 4, page 3, line 38, leave out “Minister” and insert “First Tier Tribunal”.
Amendment 18, in clause 4, page 4, line 3, leave out “Minister” and insert “First Tier Tribunal”.
Mike Wood
The amendments are all about ensuring that there is not just independent oversight but an effective independent channel of appeal against information notices that does not just go back to the same organisation that issued the original notice. Clause 4 will allow for the person to whom the information notice is given to appeal the notice up to seven days after it is issued, but that appeal will go back to the Minister for the Cabinet Office—or, in practice, the PSFA—to review it and decide whether to revoke, amend or uphold the notice. As drafted, it gives the Minister significant power, as really the only responsible person who can review the decision to give the notice.
There therefore appears to be a significant lack of independent oversight. I would be grateful if the Minister could explain why there is no ability to have an independent appeal of the kind that would generally take place against HMRC decisions and notices, through the first-tier tribunal. That is why we tabled amendments 15, 16, 17 and 18: to change the appeal body from the Minister for the Cabinet Office to the first-tier tribunal. We are concerned that, given it is the Minister who has been given the power to investigate fraud, it is then a case of allowing the Minister to mark their own homework if they—or the people acting on their behalf—review the decisions themselves.
I would like to understand the Minister’s view on whether that is an effective use of ministerial time and capacity. Does she envisage that any such appeal decisions would be delegated? In the amendments, we propose to replace the Minister with the first-tier tribunal in that process, which would be equivalent to the processes that would be expected when a decision of HMRC is reviewed. Our amendments would ensure that an independent third party is involved with the review process.
I would be grateful if the Minister could explain why there should be no ability for such an appeal to be made, whether it is made immediately against the notice for information or perhaps as a second appeal stage. We need to be satisfied that there is a good reason why people who are the subject of those notices, which may be quite onerous, particularly for individuals and smaller organisations, should not have the ability to appeal to an independent body. Normally, natural justice would assume that to be the case.
Steve Darling
I concur about the safeguarding of individuals. While there may be an independent reviewer or chair, the challenge, for me, is who appoints them. If it ends up being the Minister who appoints the chair, how independent will they be? Given what we are seeing elsewhere in the world, how do we ensure that we build a structure of independence into the Bill that we may not previously have thought was needed? I am somewhat supportive of the proposals from colleagues, but equally, I look forward to hearing what the Minister has to say on the challenge.
Georgia Gould
Some points of clarity: the hon. Member for Kingswinford and South Staffordshire asked who would do the reviewing. A more senior officer from within the PSFA would complete that review, not the Minister themselves. The entire process would be overseen by a separate team who are accountable to an independent chair, and critically, who will report into Parliament to provide that level of independence.
The other important context is that the Bill also—we will come to this later—provides for the PSFA to become a statutory body, fully independent from the Minister. In the meantime, it is incredibly important that we have this process of oversight and the independent chair, as we discussed. All these issues are important for balance. We have to avoid giving fraudsters the ability to abuse the review process and frustrate investigations. As John Smart told the Committee on Tuesday, months is far too long, and adding a further route to appeal to the tribunal at that very early stage would add months, if not years, to our investigations into suspected frauds. We have tried to balance this very carefully to ensure that there are appropriate routes to review that sit within a system that is independently overseen.
I believe that we have found the right balance in the Bill, and I have explained those layers of review. They include internal review, which is the appropriate route that strikes the right balance between fairness and avoiding fraudsters frustrating the process. As I said, the internal reviewer will be a separate authorised officer, who will be—this is a requirement in clause 66—an authorised officer of a higher grade than the original decision maker. The way that these reviews are performed will be subject to oversight/ We will talk later in more detail about the oversight in the Bill, but it will include the inspections by HMICFRS and the day-to-day oversight by an independent chair, which could include live cases.
I explained in the previous debate—I did not go through the detail, but I can do so—the stages of an information notice going through if someone still does not agree that they should provide the information. Ultimately, it is really important that if a penalty is issued for non-compliance, the information provider can appeal to the relevant court against that penalty, so there is a formal appeal to a court at the end of the information-gathering process if it gets to that place. However, the intention of the powers—as I said, this will be written into the code of practice—is very much to work alongside those organisations that are gathering information, and to be proportionate to their size and the requests put forward, so I believe we have found the right balance.
Mike Wood
I thank the Minister for those responses, but I think that the first-tier tribunal is perfectly capable of dismissing applications that are without merit, without significantly extending the time. Given the importance of an independent appeal mechanism, I wish to push the amendment to a vote.
Question put, That the amendment be made.
Mike Wood (Kingswinford and South Staffordshire) (Con)
I beg to move amendment 12, in clause 4, page 3, line 33, at end insert—
“or of the duration of the period mentioned in section 3(4)(a)”.
The Chair
With this it will be convenient to discuss amendment 13, in clause 4, page 4, line 2, at end insert—
“, including by extending the duration of the period mentioned in section 3(4)(a) where satisfied that the person is reasonably unable to comply with the requirement to provide the information within the time required by the notice”.
Mike Wood
Amendments 12 and 13 are in a similar vein to amendment 14 —they allow the individual or organisation issued with an information notice to apply to the independent body or board for an extension to the 10 working days within which they are currently required to provide information requested in the notice, if they are reasonably unable to comply. Sorry, have I skipped ahead a section?
Neil Coyle (Bermondsey and Old Southwark) (Lab)
Feel free to skip ahead to the conclusion.
Mike Wood
Sorry, it has been a while since I have been on a Bill Committee.
The amendments would allow the individual or organisation to apply for an extension to the 10 working days within which they are currently required to provide information requested in an information notice, if they are reasonably unable to comply. This is a common sense approach to support people who are engaging with the process and prevent them from being hit with penalties, which was never the intention of the legislation. This is also important because we do not know precisely what information the Minister will be able to ask individuals to provide, other than that an information notice cannot require the giving of particularly sensitive—such as excluded or special procedure—material, as defined in sections 11 to 14 of the Police and Criminal Evidence Act 1984. This includes confidential business records or journalistic material. Otherwise, the Minister for the Cabinet Office has a very open-ended power to require different types of information. It would be helpful if the Minister could explain whether the Government would consider allowing those issued with information notices to apply specifically for an extension if they cannot reasonably provide the information within the time period requested.
Steve Darling
I can add very little to what the shadow Minister said. Again, I am broadly sympathetic on the need to have these safeguards in the legislation, and on not knowing what the practice notes are. We are very much in the dark, so that does give us cause for concern.
Steve Darling
I welcome that reassurance from the Minister, which we will take onboard.
Mike Wood
I thank the Minister for her response, which offered some moderate reassurance. We would be comfortable if either it was included in the Bill or we at least had sight of the code of practice, which will actually define that decision-making process. A fundamental flaw of this Bill Committee is that we are being asked to make decisions on something that may be produced in the future, of which we have no advanced sight. For now, I beg to ask leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Question proposed, That the clause stand part of the Bill.
Steve Darling
The Minister referred to a review process; it would be really helpful if the Committee could be aware of how long that process is likely to take.
Mike Wood
Clause 4 gives the Minister a considerable amount of power to compel individuals, as well as organisations, to provide an unspecified range of information within what could be very tight timescales, on pain of a fine of £300 a day if they fail to comply. The only route to appeal these powers is going back to the person or organisation that is exercising them, and we are concerned about the natural justice of this approach.
The legislation, as drafted, involves no impartial third party in the review process on a case-by-case basis, so it leaves individuals with nowhere else to go if they disagree with what is being asked for, or cannot practically comply with the request in the specified timeframe. Our amendments aim to balance these powers, and I am naturally disappointed that the Minister was unable to consider accepting at least some of them.
Georgia Gould
First, it is important to set out that these powers will be used by authorised officers who sit within a professional standard. They are highly trained and have a code of ethics that they apply. It is a deliberately limited group of people to ensure that we have full oversight. The kind of decisions that they make will have to be written down, so they can be overseen by the team within the Cabinet Office, which is answerable to the independent chair and to another independent body, and that is likely to be HMICFRS. I think I have already set out, and it is in the Bill, that the reviews on a case-by-case basis will have to be done by another authorised officer who is of a higher grade than the one who made the decision. There will be no set time, but we will set out a range within the wider guidance.
The intention of the Bill is to ensure that we prevent and recover fraud against the public sector. We want to be reasonable and proportionate, and as I have said, we will set out further information about the size and scale of organisations and timeframes within the code of practice. What we really need to avoid is organisations that have committed fraud using appeals to frustrate the process and keep this going for ages, so that money is moved and we lose the ability to recover critical public funds. We think that a huge amount of oversight has been put into this overarching package, but we have to ensure that we allow authorised officers to get the information they need and recover fraud. Finally, it is important to remember that, if we go through a process where somebody does not provide that information, and a fine is levied, they are able to apply to the courts at that point. There is that fundamental backstop to the system.
Question put and agreed to.
Clause 4 accordingly ordered to stand part of the Bill.
Ordered, That further consideration be now adjourned. —(Gerald Jones.)
Public Authorities (Fraud, Error and Recovery) Bill (Fourth sitting)
Mike Wood ExcerptsThursday 27th February 2025
(6 days, 4 hours ago)
Public Bill CommitteesRead Full debate Public Authorities (Fraud, Error and Recovery) Bill 2024-26 View all Public Authorities (Fraud, Error and Recovery) Bill 2024-26 Debates Read Hansard Text Read Debate Ministerial Extracts Amendment Paper: Public Bill Committee Amendments as at 27 February 2025 - (27 Feb 2025)
The Parliamentary Under-Secretary of State for Work and Pensions (Andrew Western)
It is a pleasure to serve under your chairship, Mrs Lewell-Buck. Clause 5 is an explanation of the principles related to information sharing that pertain to the Public Sector Fraud Authority and the Cabinet Office. It sets out how the disclosure of information would work for the purpose of facilitating the Minister’s exercise of the core functions. It refers to how the Minister may use information disclosed under subsection (1); the specific purposes for which it may be disclosed; and what the Minister may not use information for. Information must not be used for any purpose other than the purpose for which it was disclosed and may not be disclosed to any other person without the consent of the Minister. I commend the clause to the Committee.
Mike Wood (Kingswinford and South Staffordshire) (Con)
Clause 5 will give the Minister enormous powers to request and share information for the purpose of facilitating the Minister’s exercise of the core functions under the Bill. Given that the Minister’s core functions are to decide whether to investigate and take enforcement action, we are concerned that almost any information could be shared to facilitate the making of those decisions.
Likewise, the Minister may share information onward. If they give consent, the information may go further yet. Again, this is a case of the Minister marking their own homework. They get to decide who knows what and whether it gets shared onwards, without any external oversight from an impartial third party. I would be grateful if the Minister explained what sort of information the Government envisage being requested, under what circumstances, and what safeguards will apply to the sharing of that information.
Andrew Western
I thank the shadow Minister for his question. I would not want to second-guess the specifics of what may be required in the sharing of information on a case-by-case basis; clearly that sort of speculation may restrict us unnecessarily. What I would say, however, is that the independent oversight powers laid out for the execution of the PSFA’s work would be in place to ensure that if anybody, up to and including the Minister, were considered to have overstretched their powers, it would be able to comment and investigate as necessary.
Question put and agreed to.
Clause 5 accordingly ordered to stand part of the Bill.
Clause 6
Amendment of the Investigatory Powers Act 2016
Andrew Western
I am sure that colleagues will agree that the amendment is straightforward. It will limit the designation of the Cabinet Office as a relevant public authority for the purposes of part 3 of the Investigatory Powers Act 2016, so that it is designated only in so far as it relates to the Public Sector Fraud Authority.
Clause 6 sets out the purposes of the amendment to the 2016 Act and is straightforward in its terms. It will make a small tweak before the entry for the Common Services Agency for the Scottish Health Service to insert “Cabinet Office” and the relevant provision.
Mike Wood
As the Minister says, the clause will add the Cabinet Office to the Investigatory Powers Act 2016. The Act governs the powers available to the state to obtain communications and communication data, provides statutory safeguards and clarifies what powers different public authorities can use and for what purpose. This legislation will give the Cabinet Office further and greater investigatory powers.
Government amendment 1 seeks to clarify that this applies not to the whole of the Cabinet Office, but to the Public Sector Fraud Authority only. I am glad that the amendment will rectify that fairly major drafting error. Obviously, the Opposition support the amendment.
The Parliamentary Secretary, Cabinet Office (Georgia Gould)
I am sorry to have arrived late. Clause 6 will provide essential powers to obtain communications data from telecommunications providers, as and when necessary, as part of an investigation into fraud against the public sector. As a result of the clause, the PSFA will be listed under column 1 of schedule 4 to the Investigatory Powers Act 2016 and will thereby be granted the power to request communications data—the how, where, what and when, as opposed to the content, of communications—for the purposes of investigating suspected fraud against the public sector. The clause will not give the PSFA surveillance and covert human intelligence powers.
The precise listing of the PSFA in schedule 4 will not permit self-authorisation to use the relevant powers; a request for communications data in the course of a criminal investigation must be approved by the independent Office for Communications Data Authorisations. The powers also come with extra oversight from the Investigatory Powers Commissioner’s Office, which will inspect the designated communications data single point of contact that facilitates the lawful acquisition of communications data and effective co-operation between the IPCO and public authorities that have these powers.
I welcome the Opposition’s support for Government amendment 1, which is necessary to align us with the Home Office’s new approach to restrict powers to specific teams in other Departments within the same schedule. The amendment will change the way the Department appears in schedule 4 to the Investigatory Powers Act, as it will restrict the use of the powers to the Public Sector Fraud Authority only, not the Cabinet Office as a whole. The amendment will ensure that the use of the powers is properly restricted and that there are no unintended consequences for other parts of the Cabinet Office.
I commend clause 6, as amended by Government amendment 1, to the Committee.
Amendment 1 agreed to.
Clause 6, as amended, ordered to stand part of the Bill.
Clause 7
Police and Criminal Evidence Act 1984 etc powers
Question proposed, That the clause stand part of the Bill.
Mike Wood
Clauses 7 to 9 give authorised investigators the powers to enter and search premises and execute search warrants, and powers for the seizure, retention and disposal of property. Those are obviously extensive powers with potentially significant consequences. While strengthening powers to tackle fraud is welcome, we have some concerns. For example, clause 7(3) states:
“An authorised investigator is an individual who is authorised by the Minister to exercise the powers conferred by this section.”
The clause would extend some PACE powers to authorised investigators at the PSFA to investigate offences of fraud against a public authority.
An authorised investigator is defined as a Cabinet Office civil servant of at least higher executive officer grade. What training will those investigators have in order to carry out their functions appropriately? In evidence earlier this week about public sector investigators, Dr Kassem said:
“Are they trained and do they have the proper skills to enable them to investigate without accusing, for example, innocent people and impacting adversely vulnerable individuals? That would be the main challenge, in my view.”––[Official Report, Public Authorities (Fraud, Error and Recovery) Public Bill Committee, 25 February 2025; c. 6, Q2.]
Paragraph 3(2)(b) of schedule 1 states that an authorised investigator may be “a higher executive officer”, which is adding to the positions specified in PACE. The comparable position in the police appears to be specified as
“a police officer of at least the rank of inspector”.
Is the Minister satisfied that a higher executive officer is of equivalent rank and experience to a police inspector? Salary bands would suggest that they are not. A quick search suggests that the starting salary of a higher executive officer may be as little as £38,000, whereas a police inspector in London would typically be on at least £61,000. That suggests that there will be some disparity in the level of seniority that one might expect between the two positions. Is she satisfied that a higher executive officer has the seniority for the very far-reaching powers that the Bill would give them?
Turning to clause 8, it is welcome that there is a role for the magistrates court—we finally have some external oversight—where a Minister must apply to make a decision about an individual’s property.
Clause 9 amends the Police Reform Act 2002 so that an individual may go to the director general with complaints or misconduct allegations in relation to the Public Sector Fraud Authority. However, it appears that there remains discretion for the Minister, who only “may” make regulations conferring functions on the director general in relation to public sector fraud investigators and “may” disclose information to the director general. Does the Minister intend to make those regulations? What may they contain? If regulations are made under those provisions, what parliamentary procedure will they be subject to?
Georgia Gould
I thank the shadow Minister for those questions. As he said, these are important powers, and it is critical that the right training is in place. I reassure him that all these authorised officers will have relevant training to the standard that police officers have for the use of the PACE powers. As he set out in his remarks, an application for search warrants must be made to a magistrate, so there is already an external body ensuring that they will be used correctly.
Another critical component of the PSFA’s use of the powers is that if an authorised officer is visiting a property, they will be accompanied by a police officer and will not go their own, so we have not included powers of arrest because of the nature of the PSFA investigations as separate to the Department for Work and Pensions. The powers sit within a range of safeguards, some of which have been mentioned. To remind Members, His Majesty’s inspectorate of constabulary and fire and rescue services will also oversee the use of all these powers, as it has experience of doing that. The powers will be overseen in any serious circumstances by the Independent Office for Police Conduct.
Question put and agreed to.
Clause 7 accordingly ordered to stand part of the Bill.
Schedule 1 agreed to.
Clauses 8 and 9 ordered stand part of the Bill.
Clause 10
Acting for another public authority
Question proposed, That the clause stand part of the Bill.
Georgia Gould
As I have set out, the Bill provides the key powers to investigate suspected fraud against the public sector. However, to be able to deliver a holistic counter-fraud service and recover vital funds lost to fraud and error, powers are needed to act on behalf of other public authorities for recovery action. That is what clause 10 outlines. The PSFA will already have conducted investigations before the recovery phase and will know the background to the case and the people and businesses involved. It will be able to leverage that information and those relationships to secure recovery, prioritising voluntary repayments first. It will then be able to utilise the proposed recovery powers already used across Government to get back fraudulent funds where people can afford to repay their illicit gains but are refusing to engage with us.
The recovery of fraudulent funds is complex, as is fraud itself. In 2021-22, the Government’s fraud landscape report found that only 23% of fraud losses were recovered. That is not good enough. Having a central recovery function within the PSFA will allow it to develop the expertise and capability required to drive effective recovery action on behalf of other public bodies. Providing the option to keep some of the recovered funds, subject to agreements with the public bodies concerned, helps to fund the development of that recovery expertise and provides value for money for the Government and taxpayer.
Clause 11 outlines the requirement to issue a recovery notice before proceedings can be brought to a court or tribunal. The notice must outline what the Government believe is owed and why. It must also provide information as to how the amount can be voluntarily repaid. Once issued, the liable person has a minimum of 28 days to respond. The recovery notice will effectively signal the end of the PSFA investigation.
During an investigation, a suspected liable person will already have had the opportunity to make their case and provide evidence to support their position. This provides the liable person with further opportunities to positively engage on the matter, either through voluntary repayment or by providing additional evidence. It also provides them with ample opportunity to prepare for a potential future court or tribunal proceeding. The issuing of a recovery notice is therefore an important step that promotes fairness and transparency in proceedings by providing a liable person with an overview of the position.
Clause 12 provides a key safeguard for the use of the recovery powers. During an investigation, the PSFA will collect and assess evidence to determine whether a liable person or business received payments made as a result of fraud or error. It will outline its reasonings in the recovery notice. However, it will be able to use the proposed recovery powers only if a liable person agrees and a court or tribunal has made a final determination of what is owed.
We will not be making unilateral decisions as to what is owed. Instead, this process firmly embeds independent judicial decision making. If a liable person disagrees with the determinations, they can present their case in a court or tribunal. If a liable person agrees, we do not need to seek confirmation from a judge, making important judicial time and cost savings and ensuring that we do not further overburden the judicial system.
Those are all important steps in commencing our recovery action. The positive impact of the Bill is predicated on being able to effectively recover funds identified as being lost to fraud or error. We have already agreed that recovery is a vital new core function of my Department, and it is one that we should strive to ensure can operate effectively to return money lost to fraud and error to the public purse.
Mike Wood
Clause 10 allows the Minister for the Cabinet Office to act on behalf of another public authority to recover a recoverable amount, including bringing court or tribunal proceedings, and recovered money will be returned to the other public authority unless it is agreed that the Minister can retain some or all of it. We have some questions about what has to be agreed ahead of time. Can the Minister just act, or do they need prior approval from the public authority beforehand, so that there is clarity about the basis on which the Minister for the Cabinet Office is acting and any division of recovered funds?
Clause 11 sets out the recovery notice that the Minister must give before proceedings can be brought to court or a tribunal, and what is included in it. How is it decided how much can be recovered? What assets are taken into account, and what is the process before the legal system becomes involved?
Clause 12 sets out that the recovery methods can be used only to cover the amount where the liable person agrees or a court or tribunal has determined the amount is recoverable. Where the liable person does not engage, what mechanisms exist to encourage them to do so? Are there penalties if a court or tribunal is involved, and how long is the legal process typically expected to take, given current capacity? What does capacity look like at the moment? We feel that, in principle, the powers could be proportionate, but that depends on how they are to be exercised. I would be very grateful if the Minister clarified some of those points.
Georgia Gould
The first point to clarify is that before any investigation and any debt recovery are started, there would be a vulnerability test on that individual, and that would be part of the basis for the decision making. As for whether there was a voluntary agreement about the recovery of debt, a conversation would happen with the individual, but there is a limit to the amount that would be recovered—up to 40% of their assets in their bank account for fraud and 20% for error. In terms of whether people would try to frustrate the process by unnecessarily reviewing it, one of the features of the Bill is that it can include interest on the money that is paid, so that is a disincentive to continue to drag out the process, and the matter can be resolved as quickly as possible—and voluntarily.
On the initial phase of the PSFA’s investigatory and debt recovery work, if there is a limited number of officers, we do not expect a high burden on the court system—we expect less than double digits to be taken through initially—and we believe that the provision around interest is a key disincentive against frustrating the process.
Question put and agreed to.
Clause 10 accordingly ordered to stand part of the Bill.
Clauses 11 and 12 ordered to stand part of the Bill.
Ordered, That further consideration be now adjourned. —(Gerald Jones.)
Oral Answers to Questions
Mike Wood Excerpts(1 week ago)
Commons ChamberRead Full debate Read Hansard Text Watch Debate Read Debate Ministerial Extracts
Mike Wood (Kingswinford and South Staffordshire) (Con)
People throughout the United Kingdom will be disgusted if former terrorists such as Gerry Adams receive compensation from the taxpayer because of Labour’s decision to repeal the legacy Act without putting something in its place. Will the Secretary of State finally commit himself to legislating immediately to prevent that from happening?
Hilary Benn
I refer the hon. Gentleman to the answer that I gave a moment ago.
Public Authorities (Fraud, Error and Recovery) Bill (First sitting)
Mike Wood ExcerptsTuesday 25th February 2025
(1 week, 1 day ago)
Public Bill CommitteesRead Full debate Public Authorities (Fraud, Error and Recovery) Bill 2024-26 View all Public Authorities (Fraud, Error and Recovery) Bill 2024-26 Debates Read Hansard Text Read Debate Ministerial Extracts Amendment Paper: Public Bill Committee Amendments as at 25 February 2025 - (25 Feb 2025)
The Chair
Q
Professor Button: Good morning, everybody. My name is Professor Mark Button. I am co-director of the Centre for Cybercrime and Economic Crime at the University of Portsmouth and I have been researching fraud-related issues for nearly 20 years.
Dr Kassem: Good morning, everyone. I am Dr Rasha Kassem, senior lecturer and leader of the fraud research group at Aston University. Like Mark, but probably for fewer years, I have been researching all aspects of fraud.
Professor Levi: I am Michael Levi. I am professor of criminology at Cardiff University and I have been researching fraud for 53 years, so I think I win on that score, although that may mean I am very out of date.
Mike Wood (Kingswinford and South Staffordshire) (Con)
Q
I will start by asking the panel a reasonably general question. What, in your experience, are the main limiting factors in investigating public sector fraud?
Professor Button: There is a number of factors. Obviously, the first challenge with dealing with social security fraud and a lot of the rest of public sector fraud is that you have no choice but to deal with those people. It is not like a bank or a private company, which have the opportunity to decide whether to do business with that particular person. In the case of someone making a claim for a benefit, the public sector body has to deal with that person.
You are obviously dealing with increasingly highly organised fraudsters that often operate across borders. That poses significant challenges, particularly for many public sector fraud agencies, particularly when the police themselves have very limited resources. Fewer than 2,000 officers are dedicated to economic crime. They simply do not have the time to help public sector bodies deal with these things. When you look at those particular challenges, having professional capacity within government to investigate fraud with the appropriate powers is a sound basis for dealing with these problems.
Dr Kassem: The capabilities and skills of public authority staff would be a main challenge for me. Do they have the same understanding about what fraud means, its impact, the methodologies and typologies of fraud and the limitations of each type? I ask that because when you talk about fraud, you are talking about fraud committed against the public sector by individuals as well as organisations. The procedures cannot be the same in each case, and the motivations and the resources will not be the same in each case, so they have to have this understanding.
Equally, there has to be an understanding about the differentiation between fraud and error; the element of intent to deceive is the main differentiating factor. Do we have criteria that tell staff in the public sector how to differentiate between fraud and error? Is that agreed upon criteria to ensure that errors are not happening? Are they trained and do they have the proper skills to enable them to investigate without accusing, for example, innocent people and impacting adversely vulnerable individuals? That would be the main challenge, in my view.
Professor Levi: I have one final, quick point, because I know that there are a lot of questions. At one extreme, there is the point that Mark made about organised crime groups and so on, but it is a question of identifying when something is an organised crime activity, which you can only do easily either by getting intelligence or by correlating claimants’ data to build up a pattern, as in covid-19 fraud schemes. At the other extreme, there is what is probably the majority—failure to notify a change in circumstance. This has always been the most common part of the area covered by the Department for Work and Pensions. As far as the Public Sector Fraud Authority goes, I think it is a question of identifying a lot of internal cases from people that you would not ordinarily suspect.
Mike Wood
Q
Professor Button: One of the key things is always resources. If you look at the size of the PSFA at the moment, in terms of the scale of fraud, and look at some of its estimates, you see that this is substantially more than the estimates of fraud in the DWP, so having a relatively small unit, as proposed, is, I think, a limitation. For me, the key thing is having the appropriate resources within that unit to have a real impact on fraud. That question, “Is there enough there at the moment?”, is a key one.
Dr Kassem: Although I believe that this is a very positive step and definitely will enhance accountability, several things need to be considered. To start with, the definition of fraud can be a bit limiting in the current Bill, because, first, it assumes that fraud is happening for financial reasons when that is not necessarily the case. There are non-financial motives. Let us consider insider fraud—fraud committed by insiders, people working for the public authorities—which is one of the most common threats not just in the public sector, but across other sectors. A disgruntled employee can be as dangerous as someone with a financial motive. So I would stick with the Fraud Act 2006 definition of fraud, because it mentions personal gain full stop. It can be financial and it can be non-financial. That has to be clarified.
There is also the difference between fraud and error. I know that intent is mentioned—rightly so—as the main differentiating factor between fraud and error. Again, however, we have to be very clear about the criteria that would enable public sector staff to differentiate between fraud and error, because you do not want them to make mistakes and accuse innocent individuals of committing fraud, just like what happened in the Post aOffice scandal. That would cause further reputational damage to the Public Sector Fraud Authority and the public sector in general, so they have to be very careful about the criteria, which have to be agreed upon.
This is the second area that I want to talk about: because there is a difference between fraud and error, the recovery and the procedures, in terms of perpetrators committing fraud versus those committing an error, need to be clarified in the Bill. I do not think that that is clear enough at the moment.
The third point is about understanding the very nature of fraud—the fact that fraud can be committed by individuals and organisations. The policies and procedures that will be followed when you deal with fraud committed by individuals should not be the same as those that are followed when you deal with organisations. For example, if you were to take preventive measures, the procedures would be different for organisations versus individuals. With organisations, you are talking about controls, compliance measures and so on. That has to be clarified in the Bill—how fraud committed by organisations will be dealt with versus fraud committed by individuals.
Lastly, I would like to raise the possibility of abuse of power. Again, although the PSFA has greater intentions of preventing fraud, you want it to appear to the public that there is less risk of abuse of position. The oversight board will be very important there as an independent body, and perhaps it could be a board independent from the PSFA staff who oversee the work. For this to work, there have to be proper governance structures, including independent board members who have proper fraud expertise and understand the limitations and the mission of the public authorities. It will be very important for public authorities to report on their operational performance to enable that independent board to oversee properly.
Professor Levi: I do not quite agree with all those comments. Some of those measures do not need to be in the Bill, but they obviously need to be part of the structure. The Bill will hopefully last for a long time, and I am sure that you are all familiar with changes.
I think the point about the resource is important, but you also need to allow time for bedding in. There is the issue of where they will recruit staff from, and how experienced they are in actually dealing with stuff. I remember the Assets Recovery Agency, which was a stand-alone body. It was closed down because it did not recover as much as it cost at that time, as there were so many appeals. This is not quite analogous with that agency, but one needs to remember that it takes years to develop skills in actually handling cases. I do not think that is so much a question of the limitations of the Bill but a warning about not expecting too rapid results. Obviously, the practitioners and policymakers may offer a different view from mine, but I think it takes quite a long time. When I reviewed the Serious Fraud Office for the royal commission in 1992, I saw that gaining expertise in actually dealing with stuff takes quite a while, and some would argue that it has not yet done that.
Mike Wood
Q
Professor Button: With any kind of initiative like this, you will always get a degree of displacement. The clever fraudsters will find new means to get around the rules. Obviously, a lot of these measures are directed at the more opportunistic individuals who are not as well organised and probably do not invest as much time in looking for means to get around some of those measures. For that client group of offenders, the Bill will be quite effective. However, for the more organised offenders, particularly the more organised crime elements, they will find ways to get around some of these measures.
Professor Levi: I am not clear about the provisions for international linkages in the Bill. Perhaps that is something that just needs to be sorted out afterwards, but people need to be able to chase money overseas. The question about who does that, and what they need to do before they are able to do that, is pretty important. This is not so much in covid-19 frauds, because that has already happened, but a lot of these things are time critical. The asset-freezing orders that were granted to the police in 2017 have proven very effective, so we need to think about what processes there are for dealing with stuff rapidly.
Dr Kassem: I have one final point. I raised the issue of differentiating between fraud committed by individuals and by organisations. I think that needs to be sorted in the Bill, not afterwards. For example, from a governance perspective, the Bill says that you can access banks accounts and freeze assets, but whose? Are you going to take the assets from the organisation, the directors running the organisation or the fraud perpetrators inside the organisation? This has to be sorted, because you will face another issue, at least in courts, about who is the controlling mind in the organisation. The organisation has a mind of its own legally, and therefore cannot be treated in the same way as when you deal directly with individuals. If that is sorted, there will hopefully be a higher probability of recovery and fewer loopholes in the Bill.
Professor Levi: There is also the question of legal aid for those suspected or accused who have to take some measures to appeal. I was not clear about that, although it may be my fault.
Neil Coyle
Q
Professor Levi: I am not sure that it needs to be in the Bill. Definitions of what we mean by “organised” are typically vague. An act committed by three or more people for the pursuit of profit is a very low bar for organised crime. A fraud by one person can be perfectly well organised, but they are not part of an organised crime group. In policing, we talk about organised crime activity and people normally think about organised crime groups. That is a definitional problem that may be too much for the Bill in its present form, and indeed for Governments. They certainly need to think about what conditions apply to which people, and I am sure they have. I am not sure whether that constraint needs to be in the Bill, but Dr Rasha may have a different view.
Dr Kassem: For me, when I talk about fraud committed by organisations, it does not have to be organised crime. It could be a legitimate organisation defrauding the public sector. Again, the Bill mentions things around recovery, such as accessing bank accounts and seizing assets—how would they apply in cases of organisation versus individual? That needs to be thought about carefully in the Bill. Again, when you think about the nature of fraud and who is committing it, you are talking about different powers and different motives for individuals versus organisations. There are different assets and different ways of recovery. They are not the same, and therefore that has to be clarified in the Bill.
The Chair
We will now hear evidence from Helena Wood, director of public policy and strategic engagement at Cifas and a fellow of the Royal United Services Institute.
Mike Wood
Q
Helena Wood: I find it quite difficult to comment on that, given that we are yet to see the code of practice. A lot of burden has been placed on that code of practice as it stands to build in some of that proportionality. I know the Government have committed to consulting on that code of practice forthwith, but without seeing that, a lot hinges on how those powers will be used in practice. Without that being known to me at present, I would quite like to see something pulled up on to the face of the Bill to build in proportionality by design.
Both on the PSFA side and the DWP eligibility verification powers, the Bill is a very blunt instrument, as it stands, and I think the law would do well to pull up those proportionality measures on to the face of the Bill. We have to look at this Bill in its broader context: very much unintentionally, it stands at that ideological debate between the rights of the individual to privacy and the rights of society as a whole to benefit from the funds that are available to fund essential public services. We have to deal with both of those arguments with due caution and due respect. As it stands, the Bill tends to be quite blunt in the way things are proposed on its face, and I would like to see a lot more from that code of practice and how it will be built in.
Beyond that, I would like to see a lot more about the people who will be using these powers. Again, we trust the police to use their coercive and intrusive powers based on their skills, experience and training. At the moment, there is a reasonably low bar set in the legislation, which is merely to be a higher executive officer or senior executive officer—a very entry-grade civil service officer. Other coercive powers that we can see across areas I have studied over the course of a 20-year career, particularly the Proceeds of Crime Act 2002, require some professional skills: where one is not a police officer, one must be a trained financial investigator. It is a trained and accredited role that is overseen by statute. Here, the competence of the individuals using that power, and the trust we can thus place in them to use those powers proportionately, is quite limited.
Mike Wood
Q
Helena Wood: It depends which part of the Bill we are talking about. This is a game of two halves: some of the PSFA powers, for example, mirror powers that are used almost as standard across the landscape of counter-financial crime, and I think we can be more comfortable about the use of those powers. The power I have more concerns about is something that is very new and incredibly intrusive, and without limitation to it being a civil or criminal investigation: the DWP eligibility verification powers. There, we need to proceed with more caution about how they are used, given that this is very much at risk of being a blanket, phishing-style power without any recourse to the limitations and the bars that others have to reach to use other powers that would be either a civil or criminal investigation. I think that part of the Bill requires a little more thought and proportionality pulling up front, unless the Government can bring forward that code of practice to allow those of you around the room judging this Bill to see what will be in the code to limit the use of those powers to the highest risk of high-end investigations, rather than making it a blanket power.
Mike Wood
Q
Helena Wood: Absolutely. The concerns I have around those powers are about collateral intrusion. We can all agree that the quality of data both on the DWP side and on the part of financial institutions is not always as good as it could be. I completely agree with the need to minimise the level of information that those institutions give back to the DWP, to caution against unnecessary intrusions upon privacy, but I would like to see a minimum standard of data match that would be required to take action on that data. If the banks are only giving a minimum amount of information back into the DWP, how do we know that that is an absolute specific match on the individuals they have on their system? Without seeing information about how that will be acted upon in the code of practice, I am slightly cautious. We need to see that detail earlier rather than later, for you to be able to make that judgment about the risk of unintended consequences of this legislation.
Let us again look at this in its broader context. This is a very intrusive power, but it sits in a suite of other measures and powers available to investigators across the system. What we do not want to do with this power is to bring those other powers into disrepute. We have to apply it with due caution, making sure that a match is a match. I would like to see which specific data points will be available to the DWP investigator to ensure this is a match and to minimise the risk of collateral intrusion.
Andrew Western
Q
Helena Wood: That is a very good question. It goes back to the balance between individual rights to privacy and society’s rights as a whole. Only you can make the decision about where that balance falls. Going back to the previous question, I would like to see built into the oversight of the use of the power a specific requirement for the independent reviewer to look at instances of collateral intrusion and where mistakes have been made, and to report on those to Parliament. If we can build that into the code of practice—forgive me for keeping on going back to that code, but I think a lot of the use of this power hinges on how it will be used in practice and by whom. We need to build some significant guardrails against that.
The second point I would make is that to my knowledge, this is an unprecedented power internationally, so how can we be sure it is going to be effective in practice? We know, for example, that individuals rarely have one bank account in one institution any more. In fact, numerous pieces of research—forgive me; I do not have the figures in my head, but I can refer those back to the Committee—show that individuals now have masses of bank accounts across five, six, seven and up to 10 or 20 institutions. By targeting one institution, are you really going to get a full picture anyway? If this is to be proportionate, we have to be clear that intrusion is proportionate and is going to be effective in practice. I am yet to see the evidence that it is, if it is used in a scattergun way. That is why it would be great to build into the code of practice something much more targeted around risk. For example, high-risk postcodes coming through in intelligence around organised crime attacks on the benefits system might be one way to look at this.
The Chair
We will now hear evidence from Kristin Jones, formerly of the Serious Fraud Office and the Crown Prosecution Service, and from Alex Rothwell, chief executive of the NHS Counter Fraud Authority. For this panel, we have until 11 o’clock.
Mike Wood
Q
Kristin Jones: I am sure I have the same answer as Helena. Until we see the codes of practice and the operational guidance, it is difficult to tell. Obviously, I have operated in very regulated situations where there has been accountability, but without that extra information, I cannot really say at the moment. But I think it is important that when you interfere with the rights of the individual, decisions are taken at a sufficiently high level by people with sufficient experience.
Mike Wood
Is that your view as well, Alex?
Alex Rothwell: I would echo Kristin’s thoughts. I suppose there is not necessarily anything novel in the Bill. Those powers exist elsewhere, so we have seen them in operation. The ability to test and learn, which is baked into the proposals, is very helpful. Importantly, it addresses a need.
Mike Wood
Q
Kristin Jones: Not on the face of the legislation necessarily, but I would perhaps expect certain commitments in debate that the code of practice will cover certain areas.
Mike Wood
Q
Kristin Jones: I do have some reservations about dealing with corporate organisations, as was expressed earlier, because a corporate cannot speak itself; it can speak only through its officers. The Bill only talks about notices; it does not talk about answering questions. It is quite difficult if you are not able to ask an officer of a corporate questions and you have just written answers through notices. I wonder whether there are sufficient powers for dealing with the more serious, top end of public sector fraud.
Mike Wood
Q
Alex Rothwell: Perhaps a good example is that although we believe we are losing something in the region of £1.3 billion a year to fraud, the amount of fraud that is actually identified is relatively low, because a lot of the value we get is from future prevention. For example, in 2023-24, the figure was something like £5.2 million, but we only recovered 12% of that figure. There is a lot more value to be had. The Bill will be incredibly helpful for us to recover more money from people who have been suspected of fraud. When it comes to pursuing criminal justice outcomes in relatively low value cases—perhaps individuals who have taken £5,000 or £10,000, who have been exited through human resources processes or who have simply left the organisation—the Bill gives us an incredible opportunity to recover more funds, and I think we would use it extensively.
Mike Wood
Q
Kristin Jones: My career has been dealing with fraud in the public and private sector, and I think it is important that when fraud is investigated and you discover something that is not in your scope, you are able to communicate it so that fraudsters are tackled, whether that is in the private or public sector. That is my only concern.
Alex Rothwell: The Bill seems pretty comprehensive in terms of our requirements. There are things that I have concerns around, including training—not just of individuals who are exercising the powers, but of those who manage them and set the culture and tone of an organisation and how it is built in. I echo Kristin’s comments about private sector providers. For example, we are increasingly seeing private sector providers providing NHS services, so how would that be exercised? From my point of view it is more about the exercise of the powers than the extent of the powers.
Kristin Jones: The other thing I think is missing compared to when other organisations have been established is that we only talk about investigators. I am a great believer in a multidisciplinary team, with early legal advice, accountancy advice as necessary and financial investigators, but we have an organisation at the moment in which we only define the role of the investigators.
Andrew Western
Q
Alex Rothwell: I certainly echo your thoughts in terms of attitude. We have seen that expressed in a number of different ways through surveys and transparency—the international transparency index, for example. In terms of statistics, we have seen our fraud prevalence rate remain fairly steady over the last five to seven years, but it is a complex picture because I think that we have been increasing our fraud protection measures as well. What we have seen across the board are bitter pay disputes and a sense that contracts do not pay enough. We have extensive provider assurance programmes that are recovering funds through what we classify as error. I do not see any change in that climate necessarily. Opportunities to strengthen prevention, for us, are the most important factor to influence people’s decision making before they commit fraud. So it is a huge concern to me, but not necessarily in terms of statistics.
Kristin Jones: During my career, I have seen sentences for fraud increase dramatically and that sends a clear message but, over my career, instead of only a few people being exposed to fraud, when you answer your telephone, there is a good chance you have a scammer at the other end; it could happen once a week, if not several times a day. If you are being targeted, it could be every mealtime, with the scammer hoping that while you are distracted you will fall for some con. The worry is that the public are exposed so much to fraud that its seriousness gets watered down in their mind. You have these forums where you can recommend how to claim various things from the Government and how to hit sweet spots to get that benefit or grant. So it has changed and perhaps people are not as shocked by fraud as they used to be.
Infected Blood Compensation Scheme
Mike Wood Excerpts(2 weeks, 6 days ago)
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Mike Wood (Kingswinford and South Staffordshire) (Con)
I thank the Minister for his very thorough statement and for advance sight of it.
I want to start by thanking the campaigners and victims who have spent years pushing for justice for this terrible tragedy that occurred over a number of decades. The previous Conservative Government took the first steps towards recognising the horrific wrong inflicted on so many patients and their loved ones in opening and concluding the inquiry into the infected blood scandal, but particular acknowledgement must go to my right hon. Friend the Member for Salisbury (John Glen) who worked so hard when he was Paymaster General to make sure that victims and their families could at last receive some degree of justice.
I welcome the progress the Government have made since the election. Parliamentary politics inevitably focuses on division and there is plenty on which we profoundly disagree with the Government, but on this matter we speak as one. There is nothing of substance that the right hon. Gentleman and his Department are doing that is meaningfully different from what we would have done if we had still been in government. We will of course review the legislation on the next stage of the infected blood compensation scheme, but the Minister and all who are campaigning for justice can be assured that we will support the Government in their efforts.
We welcome the start of compensation payments by IBCA, but we know that victims have raised concerns about the pace of processing applications for compensation. I hope the Minister can confirm what measures he is putting in place to ensure that the processing capacity within the authority is adequate and that application processing can be sped up, because the next phase of the compensation framework will mean that applications to the authority could increase by tens of thousands. All victims and their families need to know what is being done to ensure that those claims can be processed at pace.
I am concerned by reports that only a very small fraction of those who may be eligible to claim compensation have been contacted so far; one estimate puts it as low as 0.2% of possible claimants, although I recognise that such estimates can sometimes be out of date. I hope the Minister will be able to provide some clarity on the percentage of those believed to be eligible who have been contacted so far. I know that the Minister will understand the need for the Government to communicate clearly to all who may be eligible to encourage them to apply.
That reinforces the importance that must be placed on processing claims quickly. Those who are eligible must have confidence that their claims will be accurately and quickly processed so that they receive the payment they are entitled to as soon as possible. I appreciate, of course, the staged manner in which the authority is taking claims and the need to prioritise certain claims, but I hope the Government can reiterate clearly that no one needs to worry about the capacity within the authority and the system, particularly in relation to claims that will be processed in the later stages.
I ask the Minister to offer some clarity on his assessment of whether the funding allocated so far will cover all the expected claims. We know that up to 140,000 relatives could apply for compensation as a result of the planned expansion of claim eligibility. While the Government understandably cannot provide an exact estimate of the total funding required, that would go some way to offering reassurance to victims and their families that the funding for the authority to compensate in full all who suffered harm or loss and for all the operational requirements of the authority is properly provided for.
All of us in this House understand the scale and damage of this scandal and recognise the immense efforts of victims and their families in pushing for justice, and we welcome the laying of the regulations. I conclude by repeating my assurance on behalf of His Majesty’s Opposition that we will work with the Government to ensure that everyone who is eligible is aware and that they receive the compensation that they need and deserve as quickly as possible.
Nick Thomas-Symonds
I will make sure that your stricture about time is properly communicated across Government, Madam Deputy Speaker.
May I start by echoing the comments of the hon. Member for Kingswinford and South Staffordshire (Mike Wood) about my predecessor as Paymaster General, the right hon. Member for Salisbury (John Glen), who did so much in government to push this forward? Just as I offered cross-party support when shadowing him, the continued cross-party support today is very important in respect of the speed at which we are able to push forward with the legal framework we are putting in place.
On the issue of speed, I am restless for progress. While IBCA is of course an arm’s length body and has operational independence, I will none the less have more to say in due course about key performance indicators, as the House will want to continue to raise the speed of payments being made to constituents.
I entirely agree with the hon. Gentleman’s comments about clarity of communication. I am forever emphasising the need for simple explainer documents on what are complex regulations. Finally, the Government have already allocated £11.8 billion in funding for the operation of IBCA and for compensation, and we are committed to compensate all the victims of this terrible scandal.
Outsourcing: Government Departments
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Mike Wood (Kingswinford and South Staffordshire) (Con)
I congratulate the hon. Member for Middlesbrough and Thornaby East (Andy McDonald) on securing this debate. He may not be surprised to learn that I do not agree with his general position. I thank the many Members who have contributed to the debate. I must admit that some of the contributions by Government Members left me feeling a little nostalgic, although I suspect that the Prime Minister and some Government Whips might prefer them to keep such views under wraps a little more.
It is a pleasure to speak in this debate on outsourcing, which, when handled well, delivers efficiency, value for money and innovation in the provision of public services. Unfortunately, however, the actions we have seen so far from the Government are further complicating and undermining effective public procurement. Rather than building on the progress made by the previous Government, Labour is making public procurement more burdensome, less efficient and increasingly dictated by trade unions. That will make it more difficult to make outsourcing work for service users and taxpayers.
The Procurement Act 2023 was introduced to ensure a streamlined, modernised and effective procurement system that would deliver better outcomes for taxpayers. The Act was designed to cut red tape, improve transparency and ensure that public contracts were awarded based on value and efficiency, but the new Government have delayed its implementation. They have announced plans for a new national procurement policy statement—
Grahame Morris
I am interested in the hon. Member’s contention about value for money. Does he actually believe that the prison maintenance contract delivers value for money for the taxpayer?
Mike Wood
Numerous reports, not least by the Institute for Government, have found that, in many areas of Government activity, outsourcing and public procurement from private providers improves service and value for money for the taxpayer. Of course, it can be done badly, and the Probation Service is the obvious example where it clearly never worked. Although the pandemic brought things to a critical point, it was becoming increasingly difficult even before then to argue that that private provision was providing a satisfactory service.
We are still waiting for the national procurement policy statement, less than four weeks before the Procurement Act is due to commence. The new Government claim that the Act, in its current form, does not meet their vision for harnessing public procurement to deliver economic growth, value for money and social value, but it looks increasingly as though what they mean is that they want to use public contracts as a vehicle to expand trade union influence in Government, imposing costly and unnecessary regulatory burdens on businesses. In the absence of a national procurement policy statement, the Government are introducing further restrictions and bureaucracy through what they call “Make Work Pay”, but for a lot of employers that looks a lot like just making jobs more expensive.
Businesses seeking Government contracts are to be required to demonstrate trade union recognition, access for union organisers, collective bargaining arrangements, adherence to so-called fair work standards that go well beyond legal obligations, and other social commitments. Recent parliamentary answers have confirmed that those requirements will apply not only to large firms, but to small and medium-sized enterprises, undoing a lot of the good work in the Procurement Act that aimed to open up public procurement contracts to a wider range of smaller businesses.
This is not about ensuring fair treatment of workers. UK employment law already provides robust protections. This is about allowing unions to dictate the terms of our public procurement, favouring firms that meet ideological criteria rather than those that offer the best value and most efficient service.
Ian Lavery
Does the hon. Gentleman think it is right that in certain private companies, individuals are able to claim universal credit, while directors of the very same companies are trousering thousands of pounds, as are the dividend holders? It is a burden on the taxpayer—does he agree?
Mike Wood
Businesses have to fulfil their legal obligations. The previous Government introduced the national living wage, which will increase this April under the current Government, and of course where businesses of whatever type are failing to pay the national living wage, there must be proper enforcement and legal consequences.
We need to be clear about what the Government’s changes mean in practice. Instead of being awarded contracts on the basis of cost-effectiveness and efficiency, businesses will have to navigate a minefield of additional requirements, making it harder for SMEs to compete for public contracts. The added complexity will inevitably drive up costs and reduce competition, and it will ultimately mean that taxpayers get less for their money and a poorer service.
Beyond increasing costs and inefficiencies, this approach risks distorting the market by prioritising ideology over quality. Public contracts must be awarded to the best providers, whether in house or private. That means those that offer the most efficient service at the best price, rather than those that can best navigate a politically driven procurement system. The increased focus on trade union influence in procurement raises serious concerns about political favouritism and undermines the principle of fair competition.
Mike Wood
I really need to make progress so that the Minister can respond.
It is particularly troubling that Labour has refused to clarify exactly how the new procurement rules will work in practice. The NPPS, which is meant to lay out the Government’s plans, has yet to be published, leaving businesses uncertain about the future landscape of public contracts. The previous version was published nearly six months before the Procurement Act was due to commence. It is now less than four weeks before the date the Minister indicated that the Act will commence. There is no sign of what the new rules will be, and yet businesses will be expected to adapt.
Furthermore, it is essential to recognise that the regulatory burden placed on firms seeking Government contracts will have a chilling effect on investment, innovation and the growth that I understand the Chancellor is speaking of this morning. If businesses perceive that public procurement is more about politics than performance, they will simply withdraw from bidding for contracts. That will leave fewer providers and make us more reliant on a small number of mega-contractors, reducing competitive pressure to drive efficiencies. That would be disastrous for taxpayers, who deserve the best services at the lowest cost.
The previous Government recognised the need for reform and took decisive action to improve procurement. This Government, on the other hand, are undoing that work by creating a system in which trade unions hold the keys to public contracts and require businesses to comply with unnecessary and costly obligations that do nothing to improve service delivery.
Public procurement should be about securing the best services at the best price for the taxpayer, not about enforcing an ideological agenda. Labour’s approach will lead to inefficiency and waste, and will reduce competition —all at the expense of businesses and the public, who rely on well-managed services. If the Government continue down this path, they risk severely damaging the UK’s ability to run a fair and efficient public procurement system.
I have a number of questions that I hope the Minister will address. When will the Government next update their model services contract guidance and the outsourcing playbook? Are Departments still on track to save £550 million this financial year, as the Government promised they would in November? What steps are the Government taking to ensure that microbusinesses and SMEs are not excluded from bidding for, or engaging with, public sector outsourcing opportunities? What contact has the Minister had with the Business Services Association regarding any updates to the Government’s outsourcing policies? What discussions have she and her colleagues had with colleagues at the Crown Commercial Service regarding the operation of the RM6277 framework? Finally, do the Government still expect the Procurement Act to commence on 24 February? If they do, does the Minister think the very short time that businesses have to adapt between the publication of the policy statement and the commencement of the Act is acceptable?
Outsourcing and public procurement are a real test for this Government. Will they fall back on the ideology of the past or represent the interests of the public going forward? Are they working in the interests of those who use and pay for services, or in the interests of union paymasters?
Sir Jeremy Wright (in the Chair)
I will now call the Minister to respond. If there is any time left before 11 o’clock, I will invite Andy McDonald to wind up, if he wishes to.
Storm Éowyn
Mike Wood Excerpts(1 month ago)
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Mike Wood (Kingswinford and South Staffordshire) (Con)
I thank the Chancellor of the Duchy of Lancaster for his statement and for providing advance sight of it. I pay tribute to all the emergency services, responders and volunteers who have undertaken, and continue to undertake, action in response to Storm Éowyn. We join the Minister in sending our deepest condolences to those families who are grieving after the tragic deaths in Scotland and the Republic of Ireland.
Red weather warnings are rarely issued, and Storm Éowyn is certainly the worst of its kind for some time. It highlights the importance of work to strengthen preparedness and resilience across the board. I understand that the Government will be undertaking a pandemic preparedness exercise later this year. Are there any plans to undertake a similar exercise for storms and adverse weather, particularly focusing on the use of the emergency alert system that was introduced by the previous Government, its effectiveness, and the protection of critical infrastructure?
On critical infrastructure, in relation to water, what can the UK Government do to help ensure the resilience of those systems that went down over the weekend into the future? Much of the damage has been caused, or worsened, by extensive flooding. I recognise that the Government have established the floods resilience taskforce, but reports suggest that it has met just once since July. That is disappointing, if true, and I hope that the Secretary of State will clarify what actions were taken up as a result of that meeting.
As communities seek to recover and rebuild after Storm Éowyn, many face being hit again by Storm Herminia. What preparations are in place for that storm, and what flooding response preparations are now in place after the weekend?
Storm Éowyn has caused enormous damage right across the United Kingdom, as the Secretary of State said, but Scotland and Northern Ireland were particularly hard-hit. It is imperative that the Government fully understand the challenges faced by devolved authorities in providing adequate funding for storm and flooding preparedness, as well as response. I would appreciate clarity from the Chancellor of the Duchy of Lancaster on what work is being taken forward under the proper agreements to ensure progress on that.
I would also appreciate clarity on what discussions were held with the devolved Administrations ahead of the storm to co-ordinate responses and ensure that the proper preparations were in place. As the Chancellor of the Duchy of Lancaster set out in his statement, winds of more than 90 mph left a quarter of all homes in Northern Ireland, as well as many businesses, without power. Labour made a commitment in its manifesto to support the Northern Ireland Executive to improve public services in the Province. If ever there was a test of the Government’s commitment to supporting the Executive and public services in Northern Ireland, it is now, after this horrific storm.
We understand that, under mutual aid arrangements, the UK Government are providing some targeted support to Northern Ireland. Can the Chancellor of the Duchy of Lancaster unpack that further? I think he said in his statement that 102 engineers from Great Britain were currently in Northern Ireland to get power restored to affected communities. Can he confirm that figure? How many more are due to arrive, and when will they arrive? Can he confirm, given the increased frequency of this type of weather incident, what action he is taking to ensure that Northern Ireland Electricity has the in-house skills and capacity needed to respond to similar events in future? Is NHS England offering any support to the health service in Northern Ireland?
Storm Éowyn hit every nation in our United Kingdom. We have seen travel and power problems, along with the tragic loss of young life in Scotland. In Wales, the storm has prompted school closures and yet more outages. Can the Minister assure the House that he is impressing upon his colleagues in Cardiff Bay and Holyrood the need to make sure that local authorities and local health boards are properly resourced to deliver preparedness and resilience services in their communities, using the record block grants provided by the previous Government and the package announced by the Chancellor in last autumn’s Budget? Our thoughts and prayers are with all those communities affected by Storm Éowyn and with all those working so tirelessly to help them.
Pat McFadden
I thank the hon. Gentleman for his response and, in particular, for his tribute to the emergency service workers and engineers who have worked so hard over recent days. He asked a number of questions, and I will try to go through them.
The hon. Gentleman asked whether there would be a further test of the national emergency alert system. Yes, there will be. I announced that to the House about 10 days ago. There will be a second nationwide test later this year. He asked about resilience meetings. I can assure him that there has been more than one meeting on resilience over the past seven months, and I take part in them regularly. He asked about co-operation with the devolved Governments. There has been good co-operation with the devolved Governments in recent days both at the official level—we have had regular contact over the weekend—and also at the ministerial Cobra meeting that I chaired on Saturday evening, which involved the First Minister and Deputy First Minister of Northern Ireland and the First Minister of Scotland.
The hon. Gentleman asked about financial support. Both Northern Ireland and Scotland received significant increases in their budgets. I am pleased that he acknowledged—a rare acknowledgment from the Opposition Front Bench—the generosity of the settlement as a result of the Budget from my right hon. Friend the Chancellor a few months ago. He asked about the number of engineers. The latest figure I have is 102, but the number moves around.
As I said in my statement, we have had two storms and floods and power outages in different parts of the country. The principal that my officials and I have tried to instil is this: as much help as possible, as quickly as possible, to the areas where it is needed. That is what has driven our response over the weekend and through today.
Oral Answers to Questions
Mike Wood Excerpts(1 month, 1 week ago)
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Mike Wood (Kingswinford and South Staffordshire) (Con)
In recent weeks, in response to written parliamentary questions, the Cabinet Office has refused to commit to updating Parliament on the status of the targets in this plan; refused to publish information on the delivery board monitoring; refused to have an independent review and audit of the targets and to publish an annual cost analysis of them; refused to publish a risk register on meeting the targets; refused to publish an annual report; and refused to publish a public dashboard. At the same time, Ministers have been unable to explain how a series of targets in the plan will be measured, so will the Chancellor of the Duchy of Lancaster explain whether this a sign that his Department is being obstructive and evasive, or that the plan has not been thought through beyond the slogans?
Pat McFadden
I welcome the hon. Gentleman to his place. If he wants to know what the targets are, I suggest that he reads the plan for change; they are set out very carefully in it. On the lists of processes, I said that we were focused on outcomes. That is why today we have announced reform of the judicial review process to stop repeated, and often lengthy and hugely expensive, actions that delay important investment projects that are in the national interest. I would have thought that he would have welcomed that.
General Election
Mike Wood Excerpts(1 month, 3 weeks ago)
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Mike Wood (Kingswinford and South Staffordshire) (Con)
I begin by congratulating the organiser of this petition, who is my constituent in Kingswinford and South Staffordshire, Michael Westwood. The hon. Member for Bolton South and Walkden (Yasmin Qureshi) suggested that this petition was motivated by political partisanship, and she seemed to suggest that it was the result of foreign interference. As far as I know, Mr Westwood is not, and has never been, a member of any political party.
Yasmin Qureshi
What I said was that it was misinformation, as well as foreign interference and politicising. I mentioned those three things, not just one.
Mike Wood
In just a moment. He is the owner of a small business in the Black Country who has seen the impact that Labour’s broken promises are already having on his business, others like his, and the wider economy. The hon. Lady really owes Mr Westwood an apology, which I hope she will deliver in private after this debate. If she wishes to deliver it in public during the debate, I will of course give way.
Yasmin Qureshi
On a point of order, Ms Harris. At no time did I say that the individual constituent was being influenced by a foreign—[Interruption.] No, I did not say that. I said that the petition on its own, as it was sold, has been motivated by a number of factors. At no time did I attribute anything to the individual constituent of the hon. Gentleman.
Carolyn Harris (in the Chair)
Thank you, Ms Qureshi. Your point has been made and noted.
Mike Wood
I think the words speak for themselves, and Mr Westwood is sitting there having brought the petition forward and gained 3 million signatures. The signatures reflect the strength of the public’s dissatisfaction, frustration and betrayal with the Labour Government’s failure to uphold the promises they made during the election campaign.
Political parties are elected based on manifestos that outline their vision and commitments to the public. When those promises are not fulfilled or, worse, are abandoned, trust between the electorate and the Government erodes. Voters invest not only their votes but their hopes for the future in the Government they elect. When those promises are broken, as they so clearly have been here, and when hopes are dashed by the Government going back on the platform on which they were so recently elected, then people have every right to feel betrayed.
People feel betrayed by a Government who categorically promised not to increase national insurance contributions but within months had hiked that tax, threatening wage growth for workers and hammering small businesses in particular. They feel betrayed by a Prime Minister who challenged his predecessor at Prime Minister’s questions to rule out restricting winter fuel payments but within weeks of entering Downing Street had taken those same payments away from 90% of pensioners.
They feel betrayed by a Government who promised not to change agricultural property relief but then scaled back that relief, putting family farms at risk, many of which have been farmed for generations. They feel betrayed by a Government who promised to deliver the fastest growing economy in the G7, but took an economy that was growing faster than other countries in the G7 and turned it into one with no growth at all.
The Labour party knew full well what the situation was before the election, yet it cynically chose not to make its unpopular plans public. They waited until they were in power. Rather than being honest with the public in advance, they ducked the choice and took the easy route instead. Few people will imagine that this petition or debate might lead to an early election. Sadly, it is not going to happen. But the petition is another clear sign of the betrayal felt by so many voters and the collapse in trust and support that the Government were lent last summer.
The Minister without Portfolio (Ellie Reeves)
It is a pleasure to serve under your chairship, Mrs Harris.
I thank the hon. Member for Caithness, Sutherland and Easter Ross (Jamie Stone) for moving the motion today. He did so on behalf of the signatories of the e-petition that asks for a general election, and I welcome the fact that the creator of the petition has been able to listen to this debate in the Public Gallery. I also welcome back to the House all Members who have spoken in this debate and wish you all a happy new year. I am grateful for the opportunity to respond to this petition debate on behalf of the Government.
I have yet to determine whether the Leader of the Opposition has added her name to the petition, following her comments at her third outing at Prime Minister’s questions. However, I must say that opposition appears to suit her extremely well. I wish her and her colleagues many more happy years on the Opposition Benches, signing petitions to their hearts’ content.
As hon. Members may be aware, I served as Labour’s deputy national campaign co-ordinator in the run-up to the general election; the prospect of another general election so soon after the last one—and a return to 5am daily starts—fills me with what I can only describe as joy. Thankfully, as a number of hon. Members have said today, our political system does not work on the basis that those who do not like the result of any particular election are granted a rerun. In the words of the hon. Member for Boston and Skegness (Richard Tice), “You back the will of the people and the losers have to consent to the winners. That is how democracy works.” Without such a system, my party would no doubt have been tempted to request a rematch on many elections in recent years.
Of course, the lesson that we learned, which the Conservative party shows no sign of learning, is that the route back to government lies not in signing petitions calling for another general election but in facing up to the reasons for losing and fixing them. That is what we did under the leadership of my right hon. Friend the Prime Minister and it is why six months ago we were elected with the largest majority that any party has secured since 1997.
As my hon. Friend the Member for Hamilton and Clyde Valley (Imogen Walker) said, we were elected with a clear mandate for change. That is what we are delivering. Indeed, as my hon. Friend the Member for North West Cambridgeshire (Sam Carling) said, this Government have already achieved more in our first six months in office than the previous Government managed in their 14 years in power.
The Chancellor delivered a Budget that stabilised the economy, prevented a return to austerity and protected working people’s payslips. As my hon. Friend the Member for Derby South (Baggy Shanker) said, we have announced £22 billion more for the NHS and ended the strike by doctors. We are increasing the schools budget by more than £2 billion. We have set up GB Energy and lifted the ban on onshore wind to help to deliver clean power by 2030.
Mike Wood
I thank the Minister for giving way. She refers to the promises made about GB Energy. Obviously, before the election the Labour party promised that its plans would result in energy costs for households being reduced by £300. When does she expect energy prices to be £300 lower?
Ellie Reeves
Achieving our target of clean energy by 2030 will not only give us energy security, so that we are not at the whim of tyrants such as Putin, but will help us to meet our targets for net zero and give consumers energy security. That is why it is central to what the Labour Government are trying to achieve and why it is one of our core missions.
We have also set up Border Security Command to smash the gangs and returned almost 13,500 people with no right to be here. We have published our national policy planning framework to pave the way for 1.5 million homes in this Parliament, accompanied by the infrastructure to support them. We have introduced legislation to deliver the biggest upgrade to workers’ rights in a generation and to transform the experience of private renting, which many hon. Members have spoken about today. And, as my hon. Friend the Member for Hitchin (Alistair Strathern), among others, has said, all that has been against an extremely challenging backdrop.
Of course, no Government choose the circumstances in which they come to office, but there is no doubt that the previous Administration left us with the worst inheritance of any post-war Government, as many of my hon. Friends have noted today: a £22 billion black hole in the public finances—not a “management challenge” as the right hon. Member for East Hampshire (Damian Hinds) would like to have us believe, but a wrecking of the public finances by the previous Conservative Government; the worst Parliament on record for living standards; an unprecedented slowdown in wage growth; NHS waiting lists at 7.6 million, with 300,000 people waiting longer than a year for treatment; new home approvals that had dropped to record lows; higher energy bills and a weakening of our energy security; shoplifting at record highs and knife crime that had risen by 86% since 2015; and an open-borders policy. They promised to reduce net migration to under 100,000 and left us with a figure almost 10 times higher. They do not like us talking about it—they groan and chunter—but that is the reality of their record.
Of course, all that has meant that the Government have had to take hard decisions. Not all of those will be popular with everyone, but we will not shy away from making the big calls that are right for the country’s future, because that is what any responsible Government must do. We are not stopping there. As my hon. Friend the Member for Ealing Southall (Deirdre Costigan) mentioned, in our Plan for Change, published last month, we set out what we will deliver for the British people during this Parliament. It starts with raising living standards in every part of the United Kingdom, so that working people have more money in their pockets, no matter where in the country they live. We will also build 1.5 million homes and fast-track planning decisions on at least 150 major infrastructure projects. That is more than in the last 14 years combined.
A healthy economy must be built on a healthy population, which is why the Prime Minister set out our elective reform plan to tackle waiting list backlogs through millions of more appointments, so that the NHS once again meets the 18-week standard for planned treatment. Feeling safe in our communities is a fundamental right for every citizen. That is why we are providing 13,000 additional officers, PCSOs and special constables in neighbourhood teams in England and Wales, so that every community has a named officer to turn to. Our Plan for Change also commits us to secure home-grown energy while protecting bill payers. We want to be on track for clean power by 2030. Finally, we are giving children the best start in life by ensuring that a record percentage of five-year-olds in England are ready to learn when they start school. That is a priority for this Government.
That is the change that the country voted for so decisively last year. That is the change we are delivering and that is what we will carry on doing. The House returned from the Christmas recess only today, so I had hoped to be able to carry through into the new year the spirit of peace on earth and good will towards all colleagues from all parties. But I am afraid that I must disappoint those who, only six months after the general election, now want a rerun. They are, of course, entitled to voice their opinions, and this Government are committed to serving everyone in the country to the best of our ability, no matter who they voted for, but, having secured such a resounding victory at last year’s general election, we have not only the right but the responsibility to implement our programme and the change that the country voted for. That is what we will do, and when the next election eventually comes, we will be proud to stand on our record.