Oral Answers to Questions

Debate between Mike Wood and Georgia Gould

Thursday 6th March 2025 Commons Chamber

[Mike Wood (Kingswinford and South Staffordshire) (Con)]

Despite the complacent response from the Minister, fewer than 250 days in, we have already had a Transport Secretary resign over her criminal record, an anti-corruption Minister resign over corruption, questions raised over the checks on the new Investment Minister, and at least three Cabinet Ministers accused of peddling dodgy CVs. The Prime Minister either cannot or will not say whether the necessary questions were not asked on appointment, whether relevant information was not disclosed on appointment, or whether he knew perfectly well about it but only took action when they were caught? Will the independent adviser conduct an urgent review of ministerial vetting?

[Georgia Gould]

The Prime Minister is determined to uphold high standards of conduct in public office, unlike the previous Government. That is why decisive action has been taken. This is a Government in the service of working people, and we will not hesitate to take action against any Minister who fails to meet those high standards.

Public Authorities (Fraud, Error and Recovery) Bill (Seventh sitting)

Debate between Mike Wood and Georgia Gould

Committee stage
Thursday 6th March 2025 Public Bill Committees

[The Parliamentary Secretary, Cabinet Office (Georgia Gould)]

It is a pleasure to continue to serve under your chairmanship, Sir Desmond.

A priority when designing the Bill was that its powers be sufficiently balanced by strong oversight and transparent safeguards to protect the vulnerable and guard against human error. Rightly, a large number of the questions from the Committee have probed that. Clause 56 is a key part of that design. It ensures that certain steps must be taken and assured before a penalty may be issued; these steps cannot be rushed, skipped or subverted. As I have confirmed, the application of these powers will be strictly limited to specifically authorised officers within the Public Sector Fraud Authority, as set out in clause 66. To exercise the powers, these officials will be required to comply with the relevant training and qualifications, as set out in the relevant codes. They will be subject to both internal and external oversight, including scrutiny of training.

Further safeguards are embedded throughout the legislation for civil penalties. These include the right to make representations in clause 56, the ability to request an internal review in clause 57, and the ability to request an appeal to an appropriate court in clause 60. Additional details of the safeguards will be set out in a code of practice published before the first use of the civil penalty powers. I will give some detail of what will be in that code of practice when we discuss the later clauses. Clause 56 is essential because it holds the PSFA and this Government accountable, ensuring that the safeguards are not only explained to the public but maintained and reviewed by independent oversight.

Clause 57 ensures that a penalty decision notice must be issued before a penalty is imposed, and provides an essential safeguard by giving individuals access to a review and sufficient time for it to be carried out. Powers of review will be available only to authorised officers within the PSFA who are appropriately trained. Penalties are a key part of the deterrent message that this Government wish to send by delivering the Bill. Fraud will not be tolerated, but it is not enough to simply recover money lost to fraud and error. A clear message must be sent that fraudulent actions have consequences.

Clause 58 is essential to ensure that the PSFA enforcement unit acts with transparency and is held accountable for its decisions. It is also an essential safeguard for the individuals and businesses that it will deal with, as it provides a right of review and a chance for decisions to be challenged. As part of the process, the penalised person will have the opportunity to request a review of the penalty and state why it should not be imposed; a person may contest the level of the penalty. During review, a penalty will not be imposed, per clause 57(3). If a person is not satisfied with the result of a review, they will have the opportunity to appeal the outcome to an appropriate court, per clause 60. Reviews will be carried out by an authorised officer of higher grade than the authorising officer who made the original penalty decision, as stated in clause 66(3). This is yet another safeguard that ensures a fair review of the penalty.

[Mike Wood (Kingswinford and South Staffordshire) (Con)]

The clauses outline the steps and safeguards before the Minister may impose a penalty. Getting these provisions right, ensuring that due process is followed, affected individuals and businesses have a right to respond and penalties are not imposed arbitrarily, is crucial.

Clause 56 sets out the procedural rights of a person facing a penalty. It ensures that penalties are not imposed without the affected party first being allowed an opportunity to respond. Subsection (2) requires that a notice of intent be given to any person facing a penalty, inviting them to make representations before a final decision is made. Under subsection (3), the notice of intent must include the amount of the proposed penalty, the reasons for imposing a penalty of that amount, and the means by which representations may be made, as well as the timescale for doing so.

As we are approaching the end of part 1, I know that the Government will be disappointed if I do not have a long list of questions on these provisions for the Minister. A theme from Tuesday’s sessions was the time limit on representations. The Bill states that individuals and businesses must be given a minimum of 28 days to make representations. There is a little more flexibility in the provisions we debated on Tuesday, but do the Government intend to set a maximum limit, whether in the legislation or perhaps the code of practice, on the number of days that would be available for such representations? If not, how will it be ensured that the process does not become excessively prolonged, as the Minister spoke about on Tuesday? As well as causing delay for the public authority seeking to recover funds, it might cause uncertainty for businesses and individuals. We are also interested to hear about guidance that might be issued on when it would be appropriate to vary the 28 days and allow a longer period for representation in order to strike a balance.

On the issue of authorised officers, and assuming that the decisions are being delegated, the Minister has previously referred to the Carltona principle whereby Ministers can delegate decision-making and executive powers to appropriate officials. In the light of the Government’s intention to repeal the Northern Ireland Troubles (Legacy and Reconciliation) Act 2023, I am interested to know whether they have assessed the impact that might have on the operation of the Carltona principle in these circumstances. The principle is derived from pre-second world war case law, but it was significantly weakened in the Gerry Adams challenge. It was one of the things the previous Government were seeking to change, as a response to amendments in the House of Lords to re-establish the principle. In the absence of the 2023 Act, will the principle still be legally robust enough to allow the delegation that the Government intend under this Bill?

We assume that the decision on whether to maintain, reduce or cancel a proposed penalty will be made by an authorised officer rather than the Minister for the Cabinet Office, so will the Minister set out the level of seniority of the authorised officers within the PSFA and how that decision was reached? What training will those officers be required to undergo for this specific function, and what steps is the PSFA expected to put in place to ensure consistency in decision making across different cases?

Clause 57 outlines the process for issuing a penalty decision notice once a final decision has been made. Again, the requirements in the clause appear to be sensible and necessary if we are to ensure that individuals and organisations are fully informed of their liability and have an opportunity to challenge decisions that they believe to be incorrect or unfair, so we support the clause standing part of the Bill.

Clause 58 deals with reviews of penalty decisions. I have a few questions about who in the PSFA or Government will conduct the review. Who will ensure that they are properly separate from the individual decision-making process and if the reviews are to be conducted by officials, what will be the level of seniority required?

The clauses set out important procedural safeguards that seem to be appropriate to ensure penalties are not imposed unfairly. If we are given clarification regarding the degree of discretion available, the seniority, and training in decision making and the safeguards that ensure fairness, we will be content for the clauses to stand part of the Bill.

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[Mike Wood]

We support the provision that a person can appeal against a penalty to the appropriate court. This is an appropriate level of oversight for these civil penalties, and it is appropriate that the court can uphold, revoke or amend the penalty notice and make the final decision on whether an individual should be penalised for fraud. Obviously the Minister’s judgment that the behaviour was fraudulent and caused the loss to the public authority will form a part of that decision. It is clearly right that there is a role for the legal system in the appeal process. It is also sensible to have the decision by the appropriate court marked as the final decision, to prevent ongoing appeals that could frustrate the proper recovery of funds that are properly payable.

The clause also allows the Minister to make further regulation via the negative procedure regarding appeals against a penalty notice. Will she explain why the negative procedure was judged appropriate in these circumstances, rather than one that would allow Parliament automatically to have its say on any proposed regulations? What further provisions does she envisage being introduced at a later date? I understand that part of the purpose of the clause is to accommodate unforeseeable changes in circumstances, so it is not always possible to see the detail, but some clarity on the kind of area or circumstances in which regulations may be needed would help the Committee to form a judgment on the clause. If no further provisions are expected and there is no reason to imagine that they may be necessary, that clearly renders that part redundant.

That is a rather shorter list of questions to this clause—I am drawing to a close. I would appreciate if the Minister could provide that clarification.

[Georgia Gould]

I am pleased to provide that clarification. As I said, the critical point is that this provision is very limited in its scope, and the right to appeal set out in the Bill cannot be removed. In my initial remarks, I gave an example of making the appeal process more efficient, such as by allowing an appeal against a penalty or debt to be heard at the same time. The provision is limited to how appeals are operationalised, and does not affect the right to have an appeal.

Question put and agreed to.

Clause 60 accordingly ordered to stand part of the Bill.

Clause 61 ordered to stand part of the Bill.

Clause 62

Code of practice

Question proposed, That the clause stand part of the Bill.

[Georgia Gould]

The clause is an important part of the Bill because the code of practice will set out how and why civil penalties will be calculated and imposed. This will help to ensure that those powers are used transparently and reasonably. I made a commitment as we went through the previous clauses to go into detail about what will be in the code of practice, which I plan to do now.

The code of practice will set clear guidance and standards for authorised officers when using the powers. It will also help the general public to understand how those powers are exercised. To encourage co-operation with our investigations, allowing the PSFA to recover more from fraudsters in the most efficient way possible, it may be appropriate to offer discounted penalties to those who co-operate.

We will consult on the code of practice and publish it ahead of the first use of the civil penalty powers to ensure sufficient time for Members to familiarise themselves with the measures. In the spirit of being helpful to the Committee, I want to give as much detail as I can on what the code of practice will contain so that the House has the opportunity to understand it, as well as the other place in due course. This will of course be subject to change if either House amends the Bill.

The code of practice will set out the statutory obligation under which it is published, who the intended audience is, and how it should be used. It will set out the rights of anyone who is penalised, which will include appointing legal advisers or other representatives, and how to access legal aid, if entitled to do so. It will set out how the civil penalty system will be overseen by senior officials and set out the roles of the oversight function and the “independent person” under clauses 64 and 65.

The code will explain the scope of the power and how individuals, companies and other organisations will be treated. It will also set out the various kinds of penalties in the Bill, and that penalties may be applied to fraud that occurred before the Bill is enacted. It will cover the training that authorised officers will have undertaken before being authorised to issue civil penalties and the standards used by the Government’s counter-fraud profession.

The code will inform the public about the investigative process in enough detail to give a fair understanding of how cases will be proven to the civil standard, without giving so much information that it would enable a fraudster to game the system. This will include how cases are referred to the PSFA, how authorised officers will be trained to assess individual vulnerability and how that will be assessed during the initial case assessment.

The code will explain how the information powers in the Bill work, how they will be used, the safeguards for their use and how reviews may be requested. It will include how authorised officers will establish a claim, including in court, and how authorised officers will assess whether a case meets the civil burden of proof required to issue a fraud penalty. It will also test that assessment with others, including subject matter experts, specialists and legal advisers. It will explain the decision-making process, including who will make the decision about penalty calculation and imposition.

The code will also set out the circumstances in which the PSFA will not apply a penalty, such as where there has been an error rather than fraud. Importantly, it will also make it clear that civil penalties will not be applied as an alternative to criminal prosecution but as a separate response to fraud.

The code will set out how fraud penalty levels will be calculated. Penalties will be bespoke to the case they relate to, based on the individual facts. Penalties imposed will be reasonable and proportionate, and the code will set out what that means in practice. Penalty levels will be decided by reference to a variety of factors, based on the circumstances of each case. Those include, but are not limited to: the financial loss to the public authority; the time period and frequency of the offence, whether it is a one-off or a sustained fraud; the harm done to a public authority; the impact of the offence; the offender’s behaviour; whether the offender has acted alone or as part of a group; whether a position of trust held by those committing fraud has been abused.

Separately, the code will set out how the penalties in the Bill for non-compliance will work, along with information powers and debt recovery powers, and the safeguards that will be in place. It will set out the criteria by which the PSFA may offer to discount a penalty for fully co-operating and disclosing fraud. It is beneficial to the Government to seek early resolution to investigation and enforcement action, and that kind of discount is used elsewhere to incentivise that. However, the code will also explain that there can be no discount without full co-operation.

The code will set out the practical steps of issuing a penalty in accordance with the clauses in the Bill. That will include the issuing of notices of intent; how a person can access their right to make representations on any relevant matters; how penalty decision notices will be issued; and how to access the rights of internal review and of appeal to the tribunals. On that last point, the code will also help a person to understand what a tribunal is and how to appeal. It will not replicate the existing published guidance on the tribunals, which it will instead signpost people to.

The code will set out when a penalty becomes payable, how to pay it and what will happen if it is not paid. That will include setting out how the debt recovery powers in the Bill will work, if their use is required, and other potential routes of debt recovery action. Finally, the code will make it clear how the PSFA will process, hold and share data, as set out in the Bill and with reference to the Data Protection Act 2018.

The content of the code of practice, as I have set out, will give anyone affected by these powers a clear understanding of what will happen and why, their rights and responsibilities, and how the PSFA will act throughout the process. Having explained that, I commend clause 62 to the Committee.

[Mike Wood]

I thank the Minister for that explanation. Obviously, it is helpful for us to have what are, essentially, the chapter headings of the code of practice—the areas that it will cover. That clearly provides some degree of transparency, but it is no substitution for the detail of what will actually appear within those chapters.

We heard from a range of witnesses last week who, in response to many of our questions, were unable to say whether the powers and provisions in the Bill are appropriate and proportionate because of the absence of detail about the code of practice. It would be helpful and courteous to this House, therefore, if as much detail as possible about what will appear—the actual provisions for how the code of practice will operate, rather than just the chapter headings—could be made available at an early enough stage for it to be considered during the Bill’s passage through this House.

Can the Minister give more information about the input that will go into deciding what the details are within the code of practice? Which stakeholders does she expect will be engaged with? Are there any parallel equivalent codes of practice in other areas that might be expected to be a model for this code, or are we effectively starting with a blank sheet?

Again, although the Minister’s explanation is extremely welcome, we continue to be disappointed that the actual detail is currently scheduled to be made available only for Members of the House of Lords to consider before legislating, rather than elected Members of Parliament. We appreciate the recognition of the importance of transparency, which we are obviously seeking to maintain throughout the Bill, but we hope that the Government will accelerate their plans to provide more information for Members of Parliament so that informed decisions can be made about this important legislation.

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[Georgia Gould]

I will start by talking about clauses 64 and 65, and then I will address the amendment.

It is absolutely necessary that there is appropriate independent oversight to ensure the powers in the Bill are used appropriately, and we welcome debate on that. That is why we have introduced the power to appoint an independent person, which might be one person—an independent reviewer—or an organisation such as His Majesty’s inspectorate of constabulary and fire and rescue services. They will augment the existing oversight structures laid out elsewhere in the Bill, such as the role of the Independent Office for Police Conduct, set out in clause 9, which will investigate the most serious complaints into the PSFA’s use of entry, search and seizure powers.

Clause 64 mandates that an independent person appointed by the Minister undertakes reviews of the use of powers in the Bill. The independent reviewer will conduct reviews to consider whether the exercise of the powers is in keeping with the legislation, codes of practice and relevant guidance. They will produce a report of their findings for the Minister, including any recommendations they deem appropriate. The Minister is then required to publish the report and lay it before Parliament. That ensures there is both public and parliamentary accountability in the role of the independent person outlined in the Bill.

As we state in the explanatory notes, we intend to make the duty imposed by the clause in two ways. First, the Government will commission His Majesty’s inspectorate of constabulary and fire and rescue services to inspect the PSFA’s use of the new investigative powers, which can include the end-to-end investigative process and decision making. HMICFRS has a long-standing history, going back to 1856, and it independently assesses and reports on the performance of police and fire and rescue services in the UK, as well as other public bodies with investigatory powers, such as His Majesty’s Revenue and Customs. HMICFRS reports are already made available publicly, and are an efficient way to hold bodies accountable for their investigative practices.

Secondly, the Government are creating a new position for an independent reviewer to whom the PSFA’s oversight team will report. The independent reviewer will assess how the PSFA exercises the powers given to it in the Bill. The independent reviewer will carry out reviews and report on whether the use of the powers is in keeping with the legislation, codes of practice and relevant guidance, as well as considering areas where HMICFRS or other oversight bodies have not already reported. The independent reviewer could, for instance, consider live case reviews or conduct supplementary reviews between those undertaken by other bodies, or look specifically at how the PSFA has taken forward recommendations from past reviews. The independent chair will have discretion in determining where to focus their resources.

We do not believe it is necessary to legislate in the manner proposed by the amendment to ensure parliamentary scrutiny. Parliament will scrutinise the independent person’s report, which the Minister is obliged to lay in Parliament. There is also an established process for agreeing posts that should be subject to pre-appointment scrutiny by Select Committees without the need for legislative provision. That process is to reach agreement on posts suitable for pre-appointment scrutiny between my Department and the Chair of the relevant Select Committee. We will be following that process for the appointment of the independent chair. We hope that offers assurance to the hon. Member for Torbay. The appointment of the independent reviewer will also fully comply with the governance code on public appointments which is overseen by the Commissioner of Public Appointments.

[Mike Wood]

Clause 64 sets out that the independent person has responsibilities to prepare and submit a report on the review. We welcome that element of transparency, but are conscious that we need to balance those publications against the privacy of individuals. It is covered within the legislation, but could the Minister further detail the measures that are being taken to ensure that the independent person’s reviews do protect the privacy of individuals involved, especially where there may not have been a legal process in which someone has been found guilty of an offence?

What sort of person is considered an independent person for these purposes? Is the provision intended to create a team of civil servants in the Department who do these reviews, or will it be an individual? What oversight will there be of the independent reviewers, and what resources will they have? Will they have any other responsibilities beyond the report that they produce at the end of the period that the Minister sets out?

Clause 65 allows the Minister to give direction

“as to the period to be covered”

by the review, and provides that the Minister

“may disclose information to the independent person, or to a person acting on behalf of the independent person”.

Even if the Minister is only able to set timeframes for reviews, I would still like clarity as to how independent that person is intended to be from the PSFA, the Cabinet Office and the Minister. We understand why information will need to be shared between the Minister and the independent person if they are to carry out that function, but what protections are in place to maintain privacy and protect against the sharing of unnecessary personal information that goes beyond what the independent person will require?

We have some sympathy for amendment 31, tabled by the Liberal Democrats. There is clearly a need to ensure a proper and open appointment process, as choosing the right person will shape the effectiveness of many of the review mechanisms. It is therefore vital that that decision is right. The involvement of Parliament does seem to be one way of achieving that oversight, in the absence of any better proposal in the legislation. While we recognise that this role may be rather different from the others that are set out in annex D of the Cabinet Office guidance on pre-appointment scrutiny, we would be more comfortable knowing that there is going to be that scrutiny rather than relying, at some point after the legislation is passed, on conversations between whoever happens to be in the Cabinet Office at the time or whoever happens to be Chairing whichever Committee the Speaker feels is most appropriate to be conducting any such hearings.

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[Georgia Gould]

The powers in the Bill are conferred on the Minister, but they will be exercised by officials specifically authorised by the Minister and termed “authorised officers”. The clause is an essential element of the legislation. It sets out the decisions that, if not made by the Minister personally, may be undertaken by an authorised officer only: deciding to give an information notice; deciding to give a recovery notice; deciding to make or vary a direct deduction order; deciding to make or vary a deduction from earnings; deciding to give a notice of intent to impose a civil penalty; and imposing a civil penalty.

Furthermore, the clause details some fundamental safeguards on the use of the powers. First, to be appointed as an authorised officer, the individual must be employed in the civil service within the Cabinet Office. That is to ensure strict control over who may use the powers. The clause also defines who may conduct internal reviews, a protection offered widely in the Bill. Any internal reviews must be undertaken by an authorised officer at least one grade senior to the officer involved in the initial decision, or by the Minister. That ensures that officers cannot review their own decisions when challenged for an internal review.

Authorised officers form the backbone of the Government’s approach to taking the powers. The officers will need to complete a rigorous bespoke training programme, which will cover all aspects of investigative practice, including the relevant powers under the Police and Criminal Evidence Act 1984 for authorised investigators. That will be to the same standard as for other public bodies using the same powers. Only after the training conditions have been met will an individual be put forward to the Minister for authorisation to act as an authorised officer and then may use the powers. Their use of the powers must follow strict processes, guidance and codes of practice. They will be subject to internal and external independent oversight of their use of the powers.

The clause is essential, as it provides a statutory gateway for PSFA officials to use the powers under the Bill. Without the clause, the Government’s intention to improve counter-fraud enforcement would either be impractical, or the powers would be given to more individuals than is absolutely required. I commend the clause to the Committee.

[Mike Wood]

As the Minister says, the clause sets out those decisions that can be taken by an individual authorised by the Minister on their behalf. It specifies that the authorised officer must be a civil servant in her Department. Where there is a review, it must be taken by an authorised officer of a higher grade than the one who took the original decision. As we said when debating earlier clauses, the level of the original officer seems to be set at a rather lower level than in the equivalent decision-making processes in the police and other similar organisations. The measures set out in the clause appear to be sensible, but we have one or two questions about their practical aspects.

In particular, how many of the decisions referred to in the clause does the Minister expect an officer to be likely to make on a weekly basis? When we were debating civil penalty notices, the Minister suggested that it might only be a few a year. This clause covers a rather wider range of notices, so some idea of the workload to be expected of authorised officers will help us to form a better picture of the detail of what we expect authorised officers to be considering. Similarly, does the Minister have any expectation at this stage of how many authorised officers across the different grades will be fulfilling these functions?

[Georgia Gould]

I thank the hon. Gentleman for those questions. Critically, we have been clear that the team will be small. However, as I have said, if the practical use of these powers goes well—we expect it to, because they are widely used in government—there is the opportunity to grow the team. Importantly, these will be highly trained officers who are specialists in this work. They will have that breadth of experience. In the first instance, we expect around 40 cases a year, but as I said, that is subject to change as time goes on.

The team will be higher executive officers or above in the PSFA. Authorised investigators must also be higher executive officers or above. That means that they will receive further training on PACE powers. Where PACE stipulates that a decision must be made by an officer with a rank of inspector or above, schedule 1 states that it will be taken by an authorised investigator of senior executive officer grade or above. That is proportionate. These are highly trained officers. We specifically ask that the powers not be given out widely, but to a group of people who will have a huge amount of training and oversight to be able to exercise them proportionately, and in a way that recovers fraud but also safeguards those being investigated.

Question put and agreed to.

Clause 66 accordingly ordered to stand part of the Bill.

Clause 67

Disclosure of information etc: interaction with external constraints

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[Georgia Gould]

The clause is essential in protecting specific information, preventing potential harm to individuals and upholding ethical standards in situations where unauthorised sharing could cause damage. The clause ensures that the powers adhere to current data protection legislation by safeguarding data from misuse, damage and unauthorised access. It also ensures that a person’s legal professional privilege rights are protected. The clause safeguards an individual’s rights and prevents them from being forced to provide information that could incriminate them.

Amendment 3 is necessary to clarify that this power applies to all processing of information, and to provide consistency with clauses 67(1) and (2). It would replace “disclosure, obtaining or use” of information with “processing”. It would create no additional effect and ensures clear comprehension that clause 67(3) applies in relation to all processing of information.

[Mike Wood]

The clause sets out how the provisions relate to data protection legislation. It is clearly an important provision to reinforce the data protection framework, given the number of concerns raised, particularly by Opposition Members, about the protections for individual privacy. The clause sets out some protection, albeit at a baseline of the existing legal provisions, to prevent breaches of any obligation of confidence owed by the people making disclosure, or of other restrictions including legal privilege. It seems eminently sensible, but will the Minister detail further the oversight mechanisms that will ensure that the safeguards are followed? What processes and avenues are available if someone believes that the requirements set out in the clause have not been followed? How should that be pursued?

As the Minister said, Government amendment 3 is a technical amendment. We have no objection to it.

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[Georgia Gould]

Clause 68 sets out how the powers in part 1 of the Bill variously apply or do not apply to the Crown, to Parliament and to the King and his estates, and in circumstances of grounds of national security. The clause sets important boundaries on the scope of part 1. As such, it is essential that it stands part of the Bill.

The clause ensures that the Crown is bound by specific powers and provisions in the Bill. It applies in relation to premises used or held on behalf of the Crown —for example, a building owned by a Government Department—in the same way as any other premises. For instance, an authorised investigator could, if necessary, apply to a court for a warrant to enter, search and seize evidence from Crown premises. However, it does not bind the Crown in respect of some powers, specifically those in clauses 16 to 37, relating to recovery orders and recovery from bank accounts, and chapter 5, relating to civil penalties. If it did, the effect would be the Crown recovering money from itself or imposing a penalty on itself that it would pay to itself, simply moving money within its own accounts.

Subsection (4) creates a power for the Minister to certify that it appears appropriate in the interests of national security that the powers of entry conferred by this part should not be exercised on Crown premises specified in the certificate. Authorised investigators could not seek a warrant to enter those premises to search for evidence. This carve-out exists because there are certain Crown premises where searching may compromise national security. It is important that this is respected. In that event, the PSFA would discuss with the relevant Department or agency what alternative approach may be possible.

Finally, the clause states that the power of entry conferred by this part cannot be exercised on His Majesty’s private estates or premises occupied for the purposes of either House of Parliament. The King’s private estates are those held by His Majesty as a private person. This does not mean the Crown Estate—the sovereign’s public estates, which are managed by the Crown Estate commissioners on behalf of the Crown. In the incredibly unlikely event that evidence suggested that it was necessary to search the King’s private estates or either House of Parliament, the PSFA would request to be invited by the appropriate authority, which would be the Speaker or the Lord Speaker in the case of this House and the other place, respecting the privileges of Parliament.

Clause 70 is the interpretation clause, which sets out the meaning of terms used in part 1. I do not propose to run through the whole list of terms. Many of them are straightforward and refer back to previous clauses we have debated, but some are important to understand the scope of this part or are used in a novel way. I will say a few words about them so that the Committee can understand them in the correct context.

The first term is “authorised officer”, which we covered in clause 66. In this part, authorised officer has the meaning given in clause 66, which as we have already seen says that they must be employed in the civil service in the Minister’s Department. This means that other types of public sector workers, such as consultants or contractors, cannot be authorised officers, which is a safeguard on the use of the powers.

The clause defines “fraud” as including

“the offences in sections 1 and 11 of the Fraud Act 2006…and…the offence at common law of conspiracy to defraud.”

The Committee will recall that we discussed this in the debate on clauses 1 and 2, and I can repeat the assurances that I gave then. The definition sets the scope of fraud in relation to the core functions of a Minister in clause 1, and it covers the three main fraud offences: fraud by false representation, fraud by failing to disclose information and fraud by abuse of position. It also covers the common-law offence of conspiracy, which requires that two or more individuals dishonestly conspire to commit a fraud against a victim. Together, these give the scope needed to tackle the key forms of public sector fraud.

The clause defines “public authority” as

“a person with functions of a public nature so far as acting in the exercise of those functions”.

This sets out the scope of the Departments, bodies and agencies that the PSFA would be able to work with and on behalf of. The definition is deliberately wide to enable the PSFA to tackle public sector fraud wherever it may arise. It will allow the use of powers to investigate fraud against all central Government Departments and agencies—except HMRC and the DWP, because they already have existing powers—as well as local government and any arm’s length delivery mechanisms that deliver functions of a public nature.

The clause defines “suspected fraud” as

“conduct which the Minister has reasonable grounds to suspect may constitute fraud”.

We discussed this definition in the debate on clause 3. Reasonable grounds to suspect is an objective test meaning a belief based on specific evidence that a reasonable person would hold. It is not just based on the investigator’s own subjective opinion. It is a reasonable test that asks, “Would an ordinary, reasonable person”—like you or me, Sir Desmond—“being in possession of the same facts as the investigator, agree that it was reasonable to suspect that fraud had occurred?” This is a common standard to initiate an investigation.

Finally, beyond the definitions, the clause clarifies references to

“giving a notice or other document”

and sets out how court proceedings are considered to be finally determined. The clause is essential to ensure the correct understanding and interpretation of key terms used throughout part 1 of the Bill.

Clause 71 states that all regulations under this part should be made using statutory instruments. This ensures a structured approach to the regulatory framework. The clause allows for the creation of different types of provisions, such as consequential, supplementary, incidental, transitional or saving measures. This flexibility helps to adapt regulations to various circumstances.

The affirmative procedure requires that the regulations be approved by both Houses of Parliament, which ensures that there is oversight and accountability. The negative procedure allows regulations to be implemented promptly, but they can still be annulled by either House of Parliament if necessary. The option to convert regulations from the negative to the affirmative procedure ensures flexibility in response to the significance of particular regulatory provisions.

Clause 71 is essential for establishing a coherent and responsive regulatory framework in the legislation. By mandating the use of statutory instruments, it promotes a structured process that enhances accountability and keeps the regulatory system transparent.

[Mike Wood]

We fully support the measures in clause 68 on Crown premises and the Houses of Parliament—they seem perfectly sensible. As the Minister said, clause 70 specifies a whole string of definitions. Given the time, Members may be relieved to know that I do not have a specific response for each of them; there is very little in the definitions to quibble with.

Clause 71 sets out the regulations under this part. The Minister drew attention to subsection (5), which allows for the regulations specified in the Bill to be subject to either the negative or affirmative procedure. As we said earlier in Committee, many of the cases that have been outlined will be require regulations that have potentially far-reaching consequences, both for individuals and organisations. Such consequences would strongly justify the active participation of Parliament, rather than simply relying on the negative resolution, which lacks any guarantee of a debate on an attempt to pray against.

Regulations can be very difficult for Parliament to object to. We encourage the use of the affirmative procedure and hope the Government will detail their intentions on when it will be used for provisions that would otherwise be subject to the negative procedure. Beyond that, we have no objections to the clauses.

[Georgia Gould]

When I previously went through the different regulatory areas, I also went through which would be subject to the negative and affirmative procedures. I absolutely hear the point; the critical point for me is that the key provisions sit in the Bill. We do not expect changes made by regulation to change the key areas of oversight and the safeguards but, as the shadow Minister says, the provision for changes is there if necessary.

Question put and agreed to.

Clause 68 accordingly ordered to stand part of the Bill.

Clause 69

The Public Sector Fraud Authority

Question proposed, That the clause stand part of the Bill.

Public Authorities (Fraud, Error and Recovery) Bill (Fifth sitting)

Debate between Mike Wood and Georgia Gould

Committee stage
Tuesday 4th March 2025 Public Bill Committees

[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.

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[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.

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[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.

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[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]

That is right.

[Mike Wood]

That would leave £120,000, which would mean that in the second month, presumably the most that could be deducted if no further money had been paid into the into the account would be £48,000.

[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.

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[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?

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[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)

Debate between Mike Wood and Georgia Gould

Committee stage
Thursday 27th February 2025 Public Bill Committees

[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.

--- Later in debate ---

[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

[Mike Wood]

I beg to move amendment 11, in clause 3, page 2, line 36, at end insert—

“(c) the information is likely to relate to the suspected fraud, and

(d) the cost involved in recovering the required information is likely to be reasonable and proportionate.”

--- Later in debate ---

[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.

[Mike Wood]

I think we will come back to this issue at a later stage. I want to see some action on amendment 11 going forward, but, for now, I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

--- Later in debate ---

[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.

--- Later in debate ---

[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)

Debate between Mike Wood and Georgia Gould

Committee stage
Thursday 27th February 2025 Public Bill Committees

[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.

--- Later in debate ---

[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.)