Public Authorities (Fraud, Error and Recovery) Bill

Paula Barker Excerpts

2nd reading
Monday 3rd February 2025 Commons Chamber

[Paula Barker (Liverpool Wavertree) (Lab)]

I recognise that fraud exists across the public sector and that it is wholly right for any Government to track down the fraudsters, the criminal gangs and those who cheat the system at the bottom as well as the top—we have heard about the VIP fast lane—but I hold deep reservations about the unintended consequences of the Bill in its present form.

We have heard some very constructive contributions this evening from Members across the House. I thank my right hon. Friend the Secretary of State, who is always accessible and has been willing to listen to my concerns and those of my many constituents who have got in touch to express their views. Although she has allayed some of my fears, I did let her know that I would raise my concerns in the Chamber today.

First, the Bill needs to make a greater distinction between fraud and error. We cannot accept a situation in which our constituents are being accused of fraud on the back of genuine personal errors. I know at first hand from my experience as a constituency MP that the Department is more than capable of making glaring errors of its own, and people suffer greatly as a result. The welfare system is not an easy one to navigate; people should be supported when problems arise, rather than there being a natural presumption towards guilt. Many organisations that have been in touch with hon. Members share this fear, so it is essential that the Government address the point head on.

Other aspects of the Bill sit very uneasy with me. The Government already have the powers, under existing legislation, to investigate those who are suspected of fraud. That raises the question why the Bill is needed. It feels like a hammer to crack a nut.

After the second world war, the Attlee Government set about establishing a welfare state as a safety net for those who were genuinely in need. The Attlee Government took responsibility for looking after the wellbeing of all their citizens from the cradle to the grave. Worryingly, there now seems to be a determination to transform the British welfare state into a system of mass surveillance.

I will be grateful if the Minister responds to the following points. First, although I acknowledge that the Secretary of State spoke about this at the Dispatch Box, what provisions are being made in respect of proper oversight of these proposed new powers? How would any financial institution navigate data protection conflicts between the Government and its customers? How would data security risks be mitigated?

During an iteration of the Bill introduced by the last Government, the Equality and Human Rights Commission called for it to be scrapped. A legal opinion from Dan Squires KC and Aidan Wills found that the powers in the previous iteration were likely to breach UK article 8 privacy rights protected in the Human Rights Act. Can the Minister tell us what legal advice the Government have received on the proposals in the Bill?

I have serious concerns that assertions and decisions on individual cases, if automated, could lead to Horizon-style injustices if the necessary steps are not taken to put the right safeguards in place, alongside measures to guarantee some level of transparency and accountability when mistakes arise. We are looking at a hugely significant change to our welfare system, at a time when the Department is responsible for record underpayments. Surely that should be a Government priority, rather than further upheaval of a system that threatens to further stigmatise those who legitimately rely on the welfare state.

There are low levels of fraud in the benefits system. The latest Government figures put it at 2.8% of total benefit expenditure, which translates to overpayments due to fraud recorded at 3.7% in the financial year 2023-24. Although it is right and proper to look at ways to reduce that figure, politicians in this place have a responsibility to make it clear at every opportunity that any such move, especially one as far-reaching as this, is intended to target a small minority of criminals. The constituents I support often tell me that the services they interact with, and by extension the Department, tend to view them with suspicion and lack of empathy. The Bill must not be used to entrench such attitudes.

For the British public, whether they are in work or out of work, life is getting harder. Rampant inequality has broken our economic model, while the 1% continue to squeeze the rest. I very much hope that the Bill will not end up punishing the wrong people, making those inequalities even worse. I look forward to Government Front Benchers engaging with those who express legitimate concerns today and during the Bill’s parliamentary journey. I will not oppose its Second Reading, but I will work constructively with colleagues across the House to table amendments in Committee that alleviate my concerns and those of right hon. and hon. Members.

--- Later in debate ---

[Mr Luke Charters (York Outer) (Lab)]

Thank you, Madam Deputy Speaker. Last, but I hope not least.

Before entering this place, I spent a lot of my career tackling fraud. One key trend in fraud is its increasing sophistication. Rather than the art of a local chancer, fraud is increasingly conducted by organised crime groups using elaborate mechanisms, deeply advanced technology and rapidly shifting modus operandi. That includes benefit fraud gangs. I am sorry to say this, but fraud in the benefit system has reached an industrial scale. Frankly, it is time the Government got a grip, which is why I welcome their swift action in introducing this Bill.

My right hon. Friend the Secretary of State wrote an excellent op-ed today highlighting this exact point. This is the money of many hard-working Brits, and it has been stolen from right under their noses. The Tories presided over a system that allowed criminals to line their pockets at taxpayers’ expense.

[Paula Barker]

My hon. Friend is making a passionate speech, and he talks about benefit fraud on an industrial scale. Does he really believe that just over 2.5% is an industrial scale?

[Mr Charters]

As I will come to, it is about the advanced techniques that these fraud gangs are using. It is industrial-level criminal activity.

Last year, £7 billion was cheated out of taxpayers’ pockets, and we have been left to clean it up. If we had that cash, we could have funded extra police officers or vital repairs to some of our hospitals. Frankly, it would also have made it easier to fill the £22 billion black hole left by the Conservative party, wherever its Members are.

I now turn to a few concrete examples of why this Bill matters. First, on the economics, the Bill is expected to save £1.5 billion over the next few years. These are not insignificant sums of money. It is important to stress that the public purse is not an endless pot, and the contributions of millions of working people across the country, including many of my constituents in York Outer, help to fund it. They want to see taxpayers’ money being spent wisely. Stealing benefits is not just fraud; it is a slap in the face to the hard-working taxpayers who fund our public services. This Bill changes that.

The Bill is not just about keeping more taxpayers’ cash in the Treasury. As Brits, we embody the values of kindness, decency and fairness. Although we are rightly outraged about criminals circumventing our system, we all want a reliable welfare state for the people who truly need it. Every £1 stolen by benefit fraud gangs is £1 less for a low-income single parent looking for a job on universal credit, £1 less for a disabled person on the higher rate of PIP, and £1 less for someone on carer’s allowance. In many cases, these payments are a lifeline for people getting back to work. At the moment, this cash is going to criminals rather than carers.

I now turn to a few recent cases of organised benefit fraud to elucidate the scale of the challenge we face. All have been settled and are now in the public domain following prosecutions.

In May 2024, we saw the largest benefit fraud case in history. The operation saw five Bulgarian nationals forge thousands of documents to make thousands of fraudulent universal credit claims to the value of £50 million.

In October 2023, seven people were sentenced for falsely claiming employment support allowance. They used advanced techniques to hijack identities, resulting in the crime group stealing hundreds of thousands of pounds.

An investigation by City of London police in 2020 saw enforcement against a benefit fraud ring to the tune of hundreds of thousands of pounds. I take a brief moment to praise the excellent work of our law enforcement agencies, including City of London police, who I have met, for their collaboration. That is exactly how the last fraud ring was closed. This example shows the benefit of public-private partnerships, which this Bill seeks to catalyse, in tackling benefit fraud,

What do these cases have in common? The benefit fraud was actually a predicate to other illicit activities. They demonstrate the need to upgrade our response, and this Bill represents additional lines of defence in our rising to the challenges we need to fix. Some of the measures in this Bill will do exactly that: supporting covid-era fraud investigations; strengthening the PSFA by establishing it as a separate entity; giving the PSFA powers to compel evidence and enter premises with a warrant; extending the time limit to bring action against historical fraud to 12 years; and granting extra powers for recovering money.

I recently visited the national economic crime centre at the National Crime Agency, and I know the scale of the challenges we face when it comes to tackling fraudsters. I have no doubt that, with this Bill, the Government will smash the benefit fraud gangs, but we must also acknowledge that this Bill represents a significant shift for the financial industry. It is a step into a new dawn for those in the banks who work on tackling economic crime, as they will be spending more time tackling benefit fraud.

It is right that the Government are pursuing a growth-first strategy, which has to be carefully balanced with the economic crime plan. The Financial Conduct Authority’s new consumer duty was an important stride forward for the industry, and I was proud to play a small role in that, but, as scrutiny of the Bill continues, I warmly invite Ministers to engage with the FCA and report back to the House on how the new powers will carefully balance consumer vulnerability with the need to drive down benefit fraud.

Finally, there is an important scenario that must be considered more carefully as the Bill progresses in this place. A victim of domestic abuse—let us call her “Jane”—is quietly saving money to escape, but then an account information notice is issued. Based on three months of bank statements, a debt recovery notice follows. Jane has 28 days to appeal, but no access to legal advice. Worse still, her abuser intercepts the letter and her savings, which are her lifeline to escape, are seized. Her escape plan is exposed, putting her at risk. We must ensure that financial processes do not accidentally or invertedly work against victims of domestic abuse in those scenarios, as I am sure Ministers are aware.

To close, the Prime Minister said in a speech at a recent Labour party conference:

“If we want to maintain support for the welfare state, then we will legislate to stop benefit fraud”.

When it comes to tackling organised crime groups, not only is he right, but the Bill is proof he is delivering on his promise. The Bill is about smashing the benefit fraud gangs, treating taxpayers’ money fairly and ensuring we have a safety net left for the genuinely vulnerable people who need it. I refer time and again to a point I made in my maiden speech that rings as true today as it ever has done. I said:

“I want to ensure that there is no safe harbour for fraudsters, no compromise in our pursuit of their schemes and no escape from justice.”—[Official Report, 17 July 2024; Vol. 752, c. 124.]