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

Steve Darling Excerpts

Committee stage
Thursday 27th February 2025 Public Bill Committees

[The Chair]

I call the shadow Minister—sorry, the Lib Dem spokesperson.

[Steve Darling (Torbay) (LD)]

It is a pleasure to serve under your chairmanship, Mrs Lewell-Buck. I am pleased that you already see that we will become the official Opposition by the next general election, as long as the right hon. Member for North West Essex (Mrs Badenoch) continues.

The Liberal Democrats would like to state clearly that fraud is wrong and, as the Minister rightly stated, it robs the state of the ability to support people and drive the change in our communities that we all thirst for. Our concern is that this legislation is being rushed through Parliament at breakneck speed, and rushed legislation can result in dangerous consequences for those who get caught up in it eventually. I share this concern with the Minister: we legislate at haste and repent at leisure when things go wrong.

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[Mike Wood]

Clause 3 would give the PSFA the power to issue information notices to a third party, compelling them to provide information within a deadline. The amendments set out the circumstances in which that would be done and set what we think is a perfectly reasonable test of reasonableness, as well as exploring the time provided for the recipients of notices to respond. Our amendments are designed to probe some areas of this process. The powers given to the Minister for the Cabinet Office in clause 3 are wide-ranging, so we wish to ensure that these are used reasonably and proportionately, and solely in connection with the explicit purpose of the Bill. We have tabled amendments 11, 10, 14, and 9 to that end.

We have to remember that the powers can be used against individuals and small businesses. While we might expect most of the notices to be issued against multinational companies, particularly financial institutions, we also need to consider those who do not have the capacity of larger organisations. The powers must be used reasonably and effectively in all circumstances.

Amendment 11 sets a reasonableness test relating to whether the information being requested is likely to relate to the fraud in question—for example, in private text messages—and therefore whether it is reasonable to ask for that information, and whether the cost involved in recovering the required information is likely to be reasonable and proportionate. The Minister referred to equivalent powers that are available in other forms of investigation that the Government and their agencies and bodies carry out. We see the reasonableness test as equivalent to that which HMRC must meet in its notices.

We also wish to ensure that the powers are not misused, and amendments 9 and 10 are directed towards that purpose. Although clause 3 states that the Minister can use the powers only against someone

“whom the Minister has reasonable grounds to suspect has committed fraud against a public authority”

the Bill provides no definition of “reasonable”, so amendments 9 and 10 are designed to fill some of that gap.

Amendment 10 specifies that the Minister for the Cabinet Office

“has reasonable grounds to suspect a person has committed fraud against a public authority if…there is an objective basis for the Minister’s suspicion based on facts, verifiable information or intelligence, and…a reasonable person would be entitled to reach same conclusion based on the same facts, information or intelligence.”

We want to be clear about what we do not think are reasonable grounds. These would include, for example, if the Minister’s suspicions were based in any way on a person’s physical appearance—protected characteristics under the Equality Act 2010 that the person may have, or appear to the Minister to have—or were based solely on any generalisation or stereotype giving rise to a belief that certain groups or categories of people are more likely to be involved in criminal activity. We want to ensure that the powers are exercised responsibly and appropriately.

Amendment 9 gives the definition of “reasonable” as meaning that

“the Minister must have formed a genuine suspicion in their own mind, and the suspicion that fraudulent activity has taken place must be reasonable. This means that there must be an objective basis for that suspicion based on facts, verifiable information and or intelligence which indicate that fraudulent activity will be found, so that a reasonable person would be entitled to reach the same conclusion based on the same facts and information, and or intelligence.”

Amendments 9 and 10 are based on the reasonable grounds for suspicion that are contained in the PACE—the Police and Criminal Evidence Act 1984—code A.

Bearing in mind that these powers will be exercised against individuals, some of whom might struggle to provide information, we want to probe the choice of 10 days as the timeframe in which to provide information. Amendment 14 increases the minimum notice period from 10 working days to 28, which is similar to the standard minimum time that people would expect to be given to respond to written requests for information from HMRC. Given the scope of the information that might be requested, appropriate time must be given to organisations and individuals to comply. External circumstances should also be taken into account when considering the time periods. If an individual is on annual leave or off sick for a few days, they may have less than a week to provide the information or they will face significant fines. That does not seem reasonable.

We are not necessarily saying that 28 days is a better time period than seven, but I would be grateful if the Minister explained why the Government set the minimum time that they did. That is particularly pertinent, as failure to provide the information required would carry a civil penalty of £300 a day, which, for an individual, can amount to a considerable sum of money very quickly.

In its current form, without being more specific about what it means to be “reasonable” or expanding the timeframes, we are a little concerned that the powers that clause 3 gives the Minister may not include the necessary checks and balances, so I would appreciate her reassurances on that point.

[Steve Darling]

Perhaps the word that the shadow Minister used most was “reasonableness”. In our strange political world in recent months, the question of what is reasonable in our society has changed significantly following the change of President in the United States. What normal society would expect is “reasonable” of an elected official, both here and in America, gives me, as a Liberal Democrat, cause for concern in relation to how we can make sure that a Bill like this, which gives very significant powers to the state, sets safeguards in stone to protect our communities. We will come to that later, but I would welcome reassurance from the Minister. Although I am sure that we are all reasonable people in this room, others who are unreasonable might take power at a later stage of our lives. With this legislation, how can we put safeguards in place? I hope that we will cover that later, but the Minister’s early thoughts would be welcome.

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[Mike Wood]

The amendments are all about ensuring that there is not just independent oversight but an effective independent channel of appeal against information notices that does not just go back to the same organisation that issued the original notice. Clause 4 will allow for the person to whom the information notice is given to appeal the notice up to seven days after it is issued, but that appeal will go back to the Minister for the Cabinet Office—or, in practice, the PSFA—to review it and decide whether to revoke, amend or uphold the notice. As drafted, it gives the Minister significant power, as really the only responsible person who can review the decision to give the notice.

There therefore appears to be a significant lack of independent oversight. I would be grateful if the Minister could explain why there is no ability to have an independent appeal of the kind that would generally take place against HMRC decisions and notices, through the first-tier tribunal. That is why we tabled amendments 15, 16, 17 and 18: to change the appeal body from the Minister for the Cabinet Office to the first-tier tribunal. We are concerned that, given it is the Minister who has been given the power to investigate fraud, it is then a case of allowing the Minister to mark their own homework if they—or the people acting on their behalf—review the decisions themselves.

I would like to understand the Minister’s view on whether that is an effective use of ministerial time and capacity. Does she envisage that any such appeal decisions would be delegated? In the amendments, we propose to replace the Minister with the first-tier tribunal in that process, which would be equivalent to the processes that would be expected when a decision of HMRC is reviewed. Our amendments would ensure that an independent third party is involved with the review process.

I would be grateful if the Minister could explain why there should be no ability for such an appeal to be made, whether it is made immediately against the notice for information or perhaps as a second appeal stage. We need to be satisfied that there is a good reason why people who are the subject of those notices, which may be quite onerous, particularly for individuals and smaller organisations, should not have the ability to appeal to an independent body. Normally, natural justice would assume that to be the case.

[Steve Darling]

I concur about the safeguarding of individuals. While there may be an independent reviewer or chair, the challenge, for me, is who appoints them. If it ends up being the Minister who appoints the chair, how independent will they be? Given what we are seeing elsewhere in the world, how do we ensure that we build a structure of independence into the Bill that we may not previously have thought was needed? I am somewhat supportive of the proposals from colleagues, but equally, I look forward to hearing what the Minister has to say on the challenge.

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[Mike Wood]

Sorry, it has been a while since I have been on a Bill Committee.

The amendments would allow the individual or organisation to apply for an extension to the 10 working days within which they are currently required to provide information requested in an information notice, if they are reasonably unable to comply. This is a common sense approach to support people who are engaging with the process and prevent them from being hit with penalties, which was never the intention of the legislation. This is also important because we do not know precisely what information the Minister will be able to ask individuals to provide, other than that an information notice cannot require the giving of particularly sensitive—such as excluded or special procedure—material, as defined in sections 11 to 14 of the Police and Criminal Evidence Act 1984. This includes confidential business records or journalistic material. Otherwise, the Minister for the Cabinet Office has a very open-ended power to require different types of information. It would be helpful if the Minister could explain whether the Government would consider allowing those issued with information notices to apply specifically for an extension if they cannot reasonably provide the information within the time period requested.

[Steve Darling]

I can add very little to what the shadow Minister said. Again, I am broadly sympathetic on the need to have these safeguards in the legislation, and on not knowing what the practice notes are. We are very much in the dark, so that does give us cause for concern.

[Georgia Gould]

The critical thing to note here is that we have been very clear in the Bill that 10 days is a minimum. As we heard in evidence, some organisations will find it very easy to provide the information within 10 days; others will find it harder. As I have already set out, we will ensure that responding to different kinds of organisations proportionately is referenced in the code of practice.

I previously explained why we believe that the time limits in the Bill for information requests are appropriate, and why we believe that internal review strikes the right balance in preventing fraudsters from frustrating the process. The current drafting includes powers for authorised officers to vary the duration of an information notice in clause 4. The clause allows an information notice to be varied subject to the outcome of an internal review. A variation of a notice can include amending the timeframe to comply with a request if it is found that a longer timeframe is required.

We have discussed how the Bill allows information-providers a minimum of 10 working days to comply, which in practice will be tailored on a case-by-case basis, with each case judged on its own merits and the time period applied appropriately. This is a similar approach to that taken by HMRC, for example: an authorised officer would take account of the nature of the information or documents required and how easy it will be for the person to provide or produce them. That, in turn, protects the information-holder from not being asked to produce information within an unreasonable timescale. In response to the amendment, I ran through what the reasonable grounds test will be and the kinds of thinking that authorised officers will have to go through to determine what information they will gather. That includes writing it down so that their thought processes in requiring information can be reviewed.

[Steve Darling]

I welcome that reassurance from the Minister, which we will take onboard.

[Mike Wood]

I thank the Minister for her response, which offered some moderate reassurance. We would be comfortable if either it was included in the Bill or we at least had sight of the code of practice, which will actually define that decision-making process. A fundamental flaw of this Bill Committee is that we are being asked to make decisions on something that may be produced in the future, of which we have no advanced sight. For now, I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

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

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[Georgia Gould]

Clause 3 introduces a civil power that allows authorised officers to compel information from first and third parties, similar to that used by HMRC. Clause 4 introduces a right to request a review of a decision to issue an information notice within seven days of a notice being issued. The policy intention is that this provides adequate time for an individual or business to request a review of a decision to issue an information notice, and sets a time limit for a review that will balance any attempts that might be made to aggravate the information collection process by slowing down the fraud investigation unnecessarily. During the review process, authorised officers will work with information-holders to give them every opportunity to comply.

[Steve Darling]

The Minister referred to a review process; it would be really helpful if the Committee could be aware of how long that process is likely to take.

[Mike Wood]

Clause 4 gives the Minister a considerable amount of power to compel individuals, as well as organisations, to provide an unspecified range of information within what could be very tight timescales, on pain of a fine of £300 a day if they fail to comply. The only route to appeal these powers is going back to the person or organisation that is exercising them, and we are concerned about the natural justice of this approach.

The legislation, as drafted, involves no impartial third party in the review process on a case-by-case basis, so it leaves individuals with nowhere else to go if they disagree with what is being asked for, or cannot practically comply with the request in the specified timeframe. Our amendments aim to balance these powers, and I am naturally disappointed that the Minister was unable to consider accepting at least some of them.