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

Steve Darling Excerpts

Committee stage
Tuesday 18th March 2025 Public Bill Committees

[Rebecca Smith (South West Devon) (Con)]

It is a pleasure to serve under your chairmanship, Mr Western. This is the first time that I have spoken to a new clause in Committee. New clause 1, tabled by the hon. Member for Brighton Pavilion, would amend the Bill so that, where universal credit overpayments have been caused by official error, they can be recovered only where the claimant could reasonably have been expected to realise that there was an overpayment.

I am interested to know how the claimant could reasonably be expected to realise that the amount that they had received was an overpayment, as that would be the test for whether that person becomes liable for repaying the amount. If payments are made to an appointee’s bank account, do they become liable for spotting the overpayment under this new clause? Would the amount have to be repaid only if both the person eligible for the payment and their appointee realised the overpayment?

Are there figures on how much money is lost and recovered due to error? Do we therefore know how much the new clause would cost the DWP? Underpayments in taxes are recovered by His Majesty’s Revenue and Customs in the following months or years even where the individual is not at fault, and it is not clear why universal credit claimants should be any different. It would help if the Minister could explain to the Committee how, in the case of overpayments, a repayment plan will be put in place that is manageable for the person making the payments, and how that will be assessed.

We would be better off focusing on minimising official errors in the first place. What work is the DWP doing to better guard against overpayments, given that the overpayment rate for universal credit was 12.4% or £6.46 billion in the financial year ending 2024, compared with 12.7% or £5.5 billion in the financial year ending 2023? I argue that we need to focus on ensuring that overpayments are not being made, but once the error has been made, particularly because it is so costly to the taxpayer, we should try to ensure that the money is recouped.

[Steve Darling (Torbay) (LD)]

It is a pleasure to serve under your chairmanship, Mr Western. I support the new clause tabled by the hon. Member for Brighton Pavilion. On several occasions over recent weeks, Ministers have gone on the record to describe the DWP and the benefits system as a “broken” system. It is extremely helpful that the hon. Member highlighted the impact that that can have on people who often have chaotic lives and are on the edge.

I have served the people of Torbay in elected office for 30 years. Over that time, I am saddened that, particularly with the recent cost of living crisis, the levels of destitution have become worse, as I hear from people who provide food banks and other support for the people in need in Torbay. Whether it is Scope or the Joseph Rowntree Foundation, many of those good organisations highlight to policy developers that the levels of benefits are really tough and the levels of destitution in our communities are higher than they have been for many years. Therefore, I would welcome some thoughts from the Minister about this proposal, because sadly, recovery will often drive people into destitution and, as highlighted by the hon. Member for Brighton Pavilion, into severe ill health.

[The Parliamentary Under-Secretary of State for Work and Pensions (Andrew Western)]

It is a pleasure to serve under your chairship once again, Mr Western. Before I come to my general comments on the new clause from the hon. Member for Brighton Pavilion, I will attempt to respond to some of the questions that we have heard.

On how we can assure ourselves that people could reasonably have known, this assessment is made by our specialist investigation teams, who do this day in, day out. There is a balance of probabilities that they would apply to instances such as that. It is a process that has been in place for years. On whether an appointee would be liable for an overpayment, yes, they would. How much is official error? It is approximately 0.3% of all benefit payments. About £800 million is the most recently available annual figure.

On how a repayment plan is agreed—this goes to the point that the hon. Member for Torbay made also—we again have a specialist team who calculate this. We have a vulnerability framework should that be required. All repayment requests are done on an affordable basis. As we heard last week, the specifics around the new debt recovery power make attempts, throughout the process, to agree an affordable repayment plan. The limits that the Bill would put in place would be not more than 40% in the case of an ongoing deduction and 20% in cases of error. On the point about recovery causing destitution, which the hon. Gentleman also made, he will have noted that towards the end of last year, the Department announced its new fair repayment rates, reducing the amount of deduction that can be made from benefits down to 15%. As I have just outlined, further provision is made where we are looking to take these new powers to deduct directly from bank accounts.

To return to the point that the hon. Member for South West Devon made about prevention of overpayments, the eligibility verification measure is intended to help us to identify fraud, particularly in relation to capital, and people who have been abroad longer than they should be, in terms of aligning that with their eligibility for benefits, and we think that it will enable us to identify error overpayments sooner as well. Of course, people are regularly reminded to update their circumstances also. A range of mechanisms are in place already to assist with the identification of overpayments. We are not complacent. We know that there are too many overpayments through official and claimant error, just as there is far too much fraud in the Department. That is why we are taking many of the steps identified and outlined in this Bill.

Before I turn to my comments about new clause 1 specifically, let me just make a correction to something that I told the Committee last week. I said that the minimum administrative penalty that can be offered, which receives a four-week loss of benefit, is £65. I misspoke and I would like to take this opportunity to correct the record and state that the amount is £350.

New clause 1 seeks to amend existing recovery legislation, to limit when overpayments of universal credit and new-style benefits caused by official error could be recovered. Specifically, those official error overpayments would be recoverable only where the claimant could have been reasonably expected to realise they were not entitled to the overpayments in question at the time they received them. This Government are committed to protecting taxpayers’ money and ensuring that we can recover in a fair and affordable way money owed. The debt recovery powers in the Bill apply to all debt that Parliament has determined can be pursued. Section 71ZB of the Social Security Administration Act 1992, introduced in the Welfare Reform Act 2012 under the coalition Government, made any overpayment of universal credit, new style jobseeker’s allowance and employment and support allowance in excess of entitlement recoverable. That includes overpayments arising as a result of official error.

Official error can arise for a number of different reasons. Some errors, for example, occur as a result of the flexibility of the universal credit system. Unlike the tax credit system it replaces, UC works on a monthly cycle of assessment periods. It is to be expected that on occasion, corrections or changes take place over assessment periods. The system quickly rectifies these “errors” in the next assessment period and it is vital that this functionality is maintained. In these instances, the customer is not worse off as, over the course of subsequent assessment periods, they receive the correct amount on average. It is also helpful to explain that under existing departmental processes, customers have the right to request a mandatory reconsideration of their benefit entitlement as well as the amount and period of any subsequent overpayment. Following that, they can appeal to the first-tier tribunal, should they still disagree with the Department’s decision.

We recognise that overpayments, however they arise, cause anxiety for our customers. The Department’s policy is therefore to recover debts as quickly and cost effectively as possible without causing undue financial hardship to customers. DWP’s overall approach to recovery balances the need to protect public funds by maintaining recovery levels, while providing a compassionate service to all customers regardless of their circumstances. The Department’s policy is therefore to agree affordable and sustainable repayment plans. The debt recovery measures in the Bill, however, are last-resort powers for debtors who are no longer on benefits or in pay-as-you-earn employment and are persistently evading debt recovery. These powers apply across all types of debt.

All our communications to our customers signpost to independent debt advice and money guidance, and we heard from the Money and Pensions Service in our evidence sessions about how strong the partnership working between the Department and debt sector is. DWP is committed to working with anyone who is struggling to repay their debt and customers are never made to pay more than they can afford. Where a customer feels they cannot afford the proposed rate of recovery, they are encouraged to contact the Department to discuss their repayment terms. The rate of repayment can be reduced or recovery suspended for an agreed period, and the Department may also consider refunding the higher deduction that has been made. The Department’s overpayment notifications have been updated to make sure customers are aware they can request a reduction in their repayment terms. In exceptional circumstances, the Department has the discretion to waive recovery of the debt, in line with the Treasury’s “managing public money” guidance. In doing so a range of factors are considered including the circumstances in which the overpayment arose.

Finally, I have listened to and take seriously the concerns from the hon. Member for Brighton Pavilion. As the Committee is aware, the Minister for Social Security and Disability is looking at the policy design of universal credit to ensure outcomes that tackle poverty and help people to manage their money better. I will pass the concerns raised by the hon. Lady on to him, but having outlined the reasons against it, I will resist new clause 1.

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[Rebecca Smith]

New clause 9 would require the Secretary of State to lay before Parliament, within six months of the Act’s passage, an assessment of its expected impact on vulnerable customers.

Concern has been expressed in written evidence about the Bill’s impact on disabled people. It is important to ensure that vulnerable people are not inadvertently harmed by the Bill. There was a discussion about vulnerable customers in oral evidence, with Daniel Cichocki and Eric Leenders both supporting the notion of an impact assessment while being concerned about the mental strain of being under suspicion. They said that the FCA is due to publish a thematic review on this imminently. We suggest that this strengthens the case for a comprehensive assessment by the Secretary of State.

We define “vulnerable customers” as those who due to their personal circumstances are especially susceptible to harm, particularly when a firm is not acting with appropriate levels of care, per the definition used by the Financial Conduct Authority, with which the sector is familiar. New clause 9 is necessary because some of the people impacted by the Bill will be vulnerable, and some will be repaying money they acquired not through fraud but through overpayments resulting from DWP error. As we heard from UK Finance, banks have duties when they suspect that financial crime is taking place, and although such errors are obviously not financial crime committed by the person who holds the account into which the payments have been made, there is a risk that the Bill does not sit well with those existing duties on banks.

We need to ensure that communication with vulnerable bank customers is of a sufficient standard, particularly where the DWP is recovering funds in cases where customer is not at fault, because the group of people we are talking about is likely to have high levels of vulnerability. If the Minister will not accept the new clause, I would be grateful for an explanation of the reasons why and, importantly, how the Government intend to undertake monitoring, which we believe is important.

The Liberal Democrats’ new clause 12 would require an independent assessment of the impact of the Bill on people facing financial exclusion. I am interested in whether the Liberal Democrats have a particular individual or organisation in mind which they think would be appropriate to undertake such an assessment, but we do not have a difficulty with the principle of the new clause.

[Steve Darling]

New clause 12 is about financial exclusion, as the hon. Member for South West Devon said. The Liberal Democrats’ concern is that, as this morning goes on, a number of safeguards are looking to be—for want of a better phrase—baked into the system by legislation, yet according to the Minister the only thing baked into the system is the involvement of human beings. That causes me, and I am sure other colleagues, concerns.

If an annual review were to take place of the Bill’s impact on people facing financial exclusion, conducted by the independent person appointed with the Minister publishing and sharing that with Parliament, we could ensure a level of transparency. While many of us would acknowledge that the Ministers in place at the moment are well-meaning individuals, who knows where we will be in 10 years’ time? This legislation needs to stand the test of time, so baking in these safeguards would be a positive way forward. I hope that the Minister will welcome that. I look forward to his comments.

[Siân Berry]

I have a lot of sympathy with both new clauses. It is really important that we look closely, as we are mandated to do, at the impact of the Bill on the people whose examples have been raised throughout the debate. The Minister should answer the questions asked by hon. Members, and if the Government will not do what is proposed in the new clauses, he should say what the Government will do instead.

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[Steve Darling]

I encourage colleagues to support these proposals about the carer’s allowance. Carers are the backbone of many households across the United Kingdom, and I hope the Minister will support the amendment.

[John Milne (Horsham) (LD)]

It is a pleasure to serve under your chairmanship, Mr Western.

The DWP is making extensive and growing use of algorithms for investigation purposes. Without proper oversight, these systems threaten error, unfairness and bias, which could lead to wrongful debt collection. Our amendment therefore calls for an independent audit of these systems at least every six months, to ensure accuracy and fairness. The audit must be conducted by experts in data science, ethics and social policy with no ties to the DWP or system developers. True independence is key.

The audit look at issues such as accuracy, so whether the algorithms are correctly identifying overpayments; fairness, so whether they unfairly target certain groups or operate with bias; and, above all, transparency and accountability. After each audit, we suggest that a full report must be published, presented to Parliament within 14 days, and made publicly accessible. If serious flaws are found, the Secretary of State must respond within 30 days with a clear action plan to fix these issues. Overall, Liberal Democrats are positive about benefiting from new technology, but we do need to consider whether it offers help, not harm.

In the wider context, what work is the use of AI generating? There are already chronic staff shortages at the DWP, with 20% vacancy rates becoming routine. Disability Rights UK has commented that operational failures now permeate every layer of welfare administration. Fraud investigation teams therefore already lack capacity to address the annual £6.4 billion of overpayments. There are only four fraud advisers per regional office to handle cases flagged by frontline staff, which has created a bottleneck, so that very often 90% of suspected fraud cases go uninvestigated. In other words, one could suggest there is already plenty of fraud to investigate without trawling for more. This amendment ensures regular scrutiny, transparency and fairness. I urge the Minister to consider it.

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[Andrew Western]

I contend that amendment 32 is simply disproportionate given the wide range of benefits that the Bill is expected to deliver to address fraud and error, not just in the social security system but in the public sector more widely. It is essential that all of Government have access to the capabilities and tools required to stop fraudsters stealing from the taxpayer. Tens of billions of pounds are being lost to public sector fraud. These losses are unacceptable, and waste enormous sums of public money, which could be put to good use. Delaying the Bill coming into force will risk £1.5 billion of savings over the next five years. These have been certified by the Office for Budget Responsibility. The Government made a manifesto commitment that we would safeguard taxpayers’ money and not tolerate fraud or waste anywhere in public services. The Bill delivers on that commitment, and delaying its delivery is unfair on taxpayers, who deserve to have confidence that money spent by Government is reaching those who need it, and not those who exploit the system.

Secondly—we have already discussed this point at length—I remind Members that the Bill introduces new, important safeguards, including provisions for independent oversight and reporting mechanisms, to ensure the proportionate and effective use of the powers. New codes of practice will be consulted on and published to govern how new measures will be exercised in more detail. That will include details of further protections. There will be new rights of review and appeal in both parts of the Bill to ensure that there are opportunities to challenge the Government’s approach. A human being will always be involved in decisions about further investigation or the recovery of any debt.

Finally, I return to my earlier point: data and information sharing are crucial when we look at fraud and error. For example, the eligibility verification measure, while it will not be applied to carer’s allowance itself, will improve the DWP’s access to important data to help to verify entitlements, ensure that payments are correct, and prevent the build-up of overpayments. That will enable the DWP to be tough on those who cheat the benefits system and fair to claimants who make genuine mistakes. It is vital that the DWP is equipped with the right tools, and delaying this Bill will only delay these benefits. In the light of that, I hope that Members will not press the amendment.

[Steve Darling]

I beg to ask leave to withdraw the motion.

Clause, by leave, withdrawn.

New Clause 13

Liability orders

“(1) Where—

(a) a person has been found guilty of an offence under section 1 or section 11 of the Fraud Act 2006, or the offence at common law of conspiracy to defraud,

(b) that offence relates to fraud committed against a public authority, and

(c) the person has not paid the required penalties or not made the required repayments,

the Secretary of State may apply to a magistrates’ court or, in Scotland, to the sheriff, for an order (“a liability order”) against the liable person.

(2) Where the Secretary of State applies for a liability order, the magistrates’ court or (as the case may be) sheriff shall make the order if satisfied that the payments in question have become payable by the liable person and have not been paid.

(3) The Secretary of State may make regulations in relation to England and Wales—

(a) prescribing the procedure to be followed in dealing with an application by the Secretary of State for a liability order;

(b) prescribing the form and contents of a liability order; and

(c) providing that where a magistrates’ court has made a liability order, the person against whom it is made shall, during such time as the amount in respect of which the order was made remains wholly or partly unpaid, be under a duty to supply relevant information to the Secretary of State.

(4) Where a liability order has been made against a person (“the liable person”), the Secretary of State may use the procedure in Schedule 12 to the Tribunals, Courts and Enforcement Act 2007 (taking control of goods) to recover the amount in respect of which the order was made, to the extent that it remains unpaid.”—(Rebecca Smith.)

Brought up, and read the First time.

[Rebecca Smith]

I beg to move, That the clause be read a Second time.

Our new clause would provide that, where someone has been found guilty of fraud or conspiracy to defraud and not made the required payments, the Secretary of State can apply for a liability order. It further provides that, where a liability order has been made against a person, the Secretary of State may use the procedure in schedule 12 to the Tribunals, Courts and Enforcement Act 2007, on taking control of goods, to recover the amount in respect of which the order was made, to the extent that it remains unpaid.

The new clause is intended to give the DWP powers to apply to the courts to seize assets where fraud is probable, with the same burden of proof as for cash seizures. It would bring the DWP into line with the Child Maintenance Service. I know that we have had some debate on the matter, so this is probably more of a probing or tidying-up amendment than anything else, but it would be useful to have that said explicitly. It goes without saying that, if the Minister does not intend to support the new clause, I will be interested to know why. If the DWP is serious about recovering money lost to fraud and the person liable is not making the required repayments, why should the DWP not be able to apply to seize their assets?

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[Rebecca Smith]

I appreciate the Minister’s response. We will withdraw the new clause, but I urge her to go back and look at what more can be done. I appreciate that the PSFA might come in as a prescribed organisation, but I am particularly concerned about how we bridge the gap and enable more junior civil servants to blow the whistle in relation to senior colleagues. Ultimately, that was the focus of the NAO report. If there is a way to look at that ahead of Report stage, I would be grateful. I beg to ask leave to withdraw the motion.

Clause, by leave, withdrawn.

New Clause 17

Duty to consider domestic abuse risk to holders of joint accounts

“(1) Before any direct deduction order under Schedule 5 is made, the Secretary of State has a duty to consider its effect on any person (‘P’) who—

(a) is a victim of domestic abuse, or

(b) the Secretary of State reasonably believes to be at risk of domestic abuse,

where P shares a joint account with a liable person believed to be the perpetrator or potential perpetrator of domestic abuse.

(2) In this section ‘domestic abuse’ has the meaning given by section 1 of the Domestic Abuse Act 2021.”—(Steve Darling.)

Brought up, and read the First time.

[Steve Darling]

I beg to move, That the clause be read a Second time.

I start by acknowledging the hard work of Surviving Economic Abuse in this policy area. I thank that charity for its briefing, which I am sure it has shared with all Committee members. The charity and the Liberal Democrats are keen to make sure that domestic abuse, particularly where it plays out in relation to joint accounts, is on the face of the Bill, so that it is taken very seriously.

I can almost hear the Minister’s voice saying that DWP officers are well trained to deal with vulnerable claimants, but it is extremely important to put domestic abuse on the face of the Bill. Domestic abuse is a very wicked issue in my Torbay constituency, and I am sad to say that Torbay is not alone in it being a serious challenge in people’s households. I hope the Government will take this seriously and support the new clause, so we would like to press it to a vote in due course.

[Rebecca Smith]

The Conservatives—the official Opposition—share the Liberal Democrats’ view that it is vital that we use different Departments across Government to tackle domestic abuse and domestic violence. We have a really strong track record of doing that in government.

In principle, the new clause seems like a good idea. I am conscious that we need to ensure that the Bill does not exacerbate or create problems for victims and put them even more at risk. I have done a lot of work on violence against women and girls away from this place, and I am conscious of how tricky it can be to prove some of these things. I wonder whether there might be other ways to achieve the same outcome. I assume that is why the Government are not able to support the new clause.

The new clause includes language such as “potential” and “believed to be”. My gentle challenge is about whether it could be worded differently, as we go forward to other stages, to make it more achievable and deliverable, and something that would have a place in the Bill. As it stands, I am not sure that would be the case, but I am interested to see this issue debated further, because the official Opposition share the commitment to tackling domestic abuse and domestic violence.

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[Steve Darling]

I would like to press the new clause to a vote.

Question put, That the clause be read a Second time.