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

Steve Darling Excerpts

Committee stage
Thursday 6th March 2025 Public Bill Committees

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

It is a pleasure to serve under your chairmanship, Sir Jeremy. As it was to the Minister, the baton has been passed to me from our Cabinet Office spokesperson, my hon. Friend the Member for Kingswinford and South Staffordshire, as part 2 sets specifically how the Bill applies to the DWP.

We recognise that there is a huge amount of work to be done, given the increasing levels of fraud and error against the Department for Work and Pensions in recent years. We broadly support the details of part 2, but unsurprisingly, we will have some questions in the coming sessions, and we are tabling a number of amendments too.

Clause 72 amends the Social Security Administration Act 1992 to provide powers to require information related to fraud. An authorised officer can give a written notice requiring information where they have reasonable grounds to suspect that the person has committed or intends to commit fraud, and where it is necessary and proportionate to do so. The Minister spoke about how this will enable organisations outside the DWP to be required to provide information. It would be useful to understand better the Social Security Administration Act and what it is currently used for, to make sure that we have covered specifically why it needs to be amended in addition to the provisions of this legislation. I recognise what the Minister is saying, but is there a problem now? Are we not able to take its provisions far enough, and so need these changes to be made? Why are existing information-gathering powers insufficient? This is quite a broadening of the current powers, so some clarification would be great.

I have another question on clause 72 and the changes proposed to the 1992 Act. When we talk about a “person”, is this just the person the information is being requested of—an estate agent or whoever it may be—or does the term also relate to the person being investigated? Are we talking about the person who is suspected of committing a fraud, a person in possession of information about that person under suspicion, or both? In effect, who is the written notice intended for? I am sure that is probably straightforward, but it would be useful to have it outlined clearly.

I note what the Minister said about the code of practice, which I was not planning to mention in this speech. I was saving my comments on that for clause 73—we are learning as we go in this. Can the Minister confirm whether there are any limits on the non-financial institutions that will have to provide information under the verification notices? Does this include institutions such as education institutions, insurance companies, water agencies and others that people receiving benefits might be paying bills to? Where do the limits lie around the types of organisations that will be contacted? I appreciate that is done in other legislation at the moment, but it is quite a big move. We may well cover this later, but are they subject to the same sort of time restrictions as other organisations? If a school that has never had to do this before is contacted, and they have no idea of what is expected of them, how are we going to ensure that they are not penalised? This could be the first time that anything like this has come in their direction.

[Steve Darling (Torbay) (LD)]

It is a pleasure to serve under your chairmanship this afternoon, Sir Jeremy. Liberal Democrats believe, as do all members of the Committee, that fraud is bad. It clearly impacts on the ability of the state to support people and our communities. It is important to put that on the table. I will give a small overview as we start debate on part 2 of the Bill, but as a liberal, the idea of mass surveillance within this part of the Bill causes me grave concern on a number of levels. This will be unpacked over the next few sessions.

I would welcome the Minister commenting on why this piece of legislation is being rushed. The rush poses a danger to our communities. The fact that the Government commissioned a review into the carer’s allowance overpayments is to be welcomed. We Liberal Democrats called for that, but we are gravely concerned that the Government are bashing ahead with this legislation without being able to take into account any lessons that could be learned from the carer’s allowance debacle.

Although the vast majority of the challenges that we face are error and fraud, my and my colleagues’ concern is that the Government need to fix the Department for Work and Pensions, which is effectively broken. I could wax about that for England, but I will not. When the machine is not fit for purpose, we need to fix it before adding more bells and whistles; simply adding to a broken machine will not fix it. I would welcome some explanation of why we are dashing ahead when we do not have the findings from the carer’s allowance overpayments review. I would also welcome a deeper explanation of what reasonable grounds for suspecting fraud will be. Putting a bit more colour on the palette would be extremely helpful.

[Andrew Western]

I welcome the broad support from the Opposition spokesperson, the hon. Member for South West Devon, for the overall intent of the Bill. She asked a number of questions about the usage of the 1992 Act. It sets out the information-gathering options available to the Department where fraud is suspected. When we want to compel information for whatever reason—it may be a referral, or data or evidence may be suggesting that there has been fraudulent activity—there is the ability to request, as part of an ongoing investigation, any information that may be useful.

There are two principal reasons why we need changes. The first is modernisation, as I said in my opening comments. I am sure all Members can see how being able to request information via digital means will add speed and simplicity to the process. That is a basic modernisation. There is a more significant change in the shift towards an exclusion list rather than an inclusion list of organisations, which broadens the range of organisations that we can request information from.

The hon. Lady asked whether institutions such as schools or utilities companies may be in scope. In essence, anybody is in scope for this power—for a request for information—unless they are withholding exempted information. There is a range of things that would be specifically exempt. Legally privileged material is an obvious example, as is information that could lead to self-incrimination for recipients and their spouses or civil partners.

It is worth saying for clarity that organisations that provide no-cost advice and advocacy services will not be compelled to share personal data about their service users. That will maintain trust, which is an important principle of their work, and allow individuals to seek help without fear of their information being disclosed. There is also an exemption from providing excluded or special procedure material as defined under the Police and Criminal Evidence Act 1984. That includes personal records, including records relating to physical or mental health, human tissue and confidential journalistic materials. Those are the types of information that would be exempt. With the exception of the organisations providing advice and support, all organisations are essentially in scope if they hold other relevant information to help with an ongoing inquiry.

The person in receipt of the notice is the person or organisation we are compelling the information from, rather than the person about whom it is compelled. So the person receiving the notice is the one we are asking for detail from.

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[Rebecca Smith]

I thank the Minister for setting out that information. This is a short clause, so my comments will not be long. It amends section 3 of the Social Security Fraud Act 2001 to add a code of practice on the use of information powers exercised by an authorised officer.

As has been said, much has been made of the lack of a code of practice. We maintain our view, and I am sure other Opposition Members will agree. I have heard the reassurances of the Minister and, earlier today, of the Cabinet Office Minister, but the Minister’s indication of what will be in the code gives me an opportunity to ask a couple of questions.

I welcome that there will be a consultation on the code, although I appreciate that it could slow down the introduction of the legislation. Had the code of practice been developed in tandem with the Bill, or even beforehand, we could have implemented the Bill much more quickly after its passage to crack on with recouping some of the fraudulent costs and highlighting any errors being made. However, we are where we are and, even so, I welcome the consultation.

The Minister has reassured me that we will continue to hear about the code of practice, but my other question goes back to what I said on clause 72 about additional non-financial organisations that might be contacted, and to what the Minister has just said about the fines to be levied for non-compliance. A huge amount of responsibility is being placed on the people who receive these notices. This will be new to them as it is a new Government power, particularly as it pertains to the DWP.

What will be in the code of practice to ensure that we remember the people about whom we seek information are not necessarily the ones at fault? How do we communicate with them so that they want to co-operate, and so that they do not end up in a non-compliant position? This may not be within the scope of the Bill, but how do we communicate to the general public, in layman’s terms, what is expected of them? For example, if this lands on the desk of a primary school headteacher, how will the Department ensure that they understand what has been done and are not terrified by the process? How will it ensure that we achieve the process and outcomes we all seek?

[Steve Darling]

The Minister will not be surprised that I return to the fact that the Bill has been rushed. I respectfully remind him that we are a very refreshed House of Commons. This is fresh information for the vast majority of Members. Although Parliament may have a corporate memory, this Bill has moved at great pace since First Reading and we remain very concerned that this may result in errors.

The Minister has assured us that the code of conduct will be available in due course, but can he identify by what date or by when in the legislative programme? That would give us some comfort. Although positive words have been said about the code of conduct, it drives the culture of an organisation, and culture is extremely important. I look forward to some words of reassurance from the Minister.

[Andrew Western]

I am not sure that I agree with the assertion of the hon. Member for South West Devon that the time it takes to pass the code will significantly slow down the Bill. As she is aware, we are currently working with a range of organisations and stakeholders, and we are gathering information and ideas for a draft of the code.

To answer the hon. Member for Torbay, we hope to share the draft of the code before Committee in the House of Lords. I am happy to put that on the record, as it is an important point that applies to all codes of practice in the Bill, both for the Public Sector Fraud Authority and the DWP.

I am not sure I fully agree with the hon. Member for South West Devon that we could have saved time by having already drafted and consulted on the code. If there were any amendments to the Bill, the code would have to be rewritten, at least to some extent, to reflect them.

I was asked which organisations are anticipated to be called upon to provide information, as well as their willingness to do so and our ability to maintain a positive relationship. They want to engage with this, because tackling fraud is important and has a clear public benefit. We want to make the information notices as clear as possible. People will have at least 14 days to comply with an information request, and they will have the right to appeal should they have any particular issues. We would look to work with them wherever possible to ensure that they are able to provide the information needed. Clear communication is important, and we want to be certain that we achieve it.

I have dealt with the question about the code of practice, and I hope that is helpful to the hon. Member for Torbay. I struggle rather more with his suggestion that our being a new Parliament means the Bill has been rushed. A number of Bills have already made their way through the House since July. The machinery of government must be able to continue at the pace required to react to change, particularly for a Bill such as this where we are responding to evermore challenging and complex types of fraud. The Department for Work and Pensions alone lost £9.7 billion to fraud and error last year, which suggests to me that urgency is required. On that basis, I see no issues with the timings of the Bill.

Question put and agreed to.

Clause 73 accordingly ordered to stand part of the Bill.

Clause 74

Eligibility verification

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

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[Steve Darling]

I will press both my amendments to a vote.

[Siân Berry (Brighton Pavilion) (Green)]

I will press mine too.

[Rebecca Smith]

As we have just heard, clause 74 amends the Social Security Administration Act to give power to the Secretary of State to obtain information for the purposes of identifying incorrect payments of certain benefits. I think that is fairly self-explanatory, so I do not have any questions.

Schedule 3 provides further detail on eligibility verification measures, but what happens when people have an account with a bank or financial institution other than the one that DWP payments are made into? We talk a lot about linked bank accounts, but it is implied that one bank will be looking to see whether a person has multiple accounts. However, people have much more complicated lives.

How does the Minister intend to ensure that we not only look at the account into which the benefit is paid, so that the investigation is more thorough? Thinking specifically about National Savings & Investments—a Government account into which people save money—are we going to make sure that a person’s entire suite of bank accounts are included, or just the one into which the DWP pays money?

That leads me on to my amendments. As the official Opposition, we have tabled amendments 24 and 25 to schedule 3, relating to the scope of who may be subject to the legislation. I will also speak to the amendments tabled the hon. Members for Torbay and for Brighton Pavilion during my comments.

Amendment 24 would include within the scope of the Bill accounts held by a person appointed to receive benefits on behalf of another person. We have tabled that because it would mean that proxy accounts are not excluded and wider patterns of potential organised fraud could be monitored and prevented over time. Without that measure, we believe that it would be easy for fraudsters to deliberately evade monitoring.

[Steve Darling]

I am sure that many colleagues will be alive to the fact the proposals before us mean that one in eight will be affected by these quite significant powers of mass surveillance. Will the hon. Lady advise us on how many more people will be affected by including housing benefit in the proposals?

[Rebecca Smith]

If I may, I will come to that when I speak to amendment 25, which deals with housing benefit. I think it will be simpler if I deal with the amendments separately, but I thank the hon. Gentleman for that question.

We believe that we should look at the recipients of what are essentially proxy accounts because, without that measure, it would be easy, as I said, for fraudsters to evade monitoring deliberately, and therefore investigations and consequences. The Bill in its current form will be limited in how it can tackle welfare fraud, which is one of the main purposes of the legislation. Ultimately—maybe with the exception of error—where people are determined to commit fraud, there are numerous ways of doing it, and if the Government’s Bill is not enabling that significant investigation, we believe that it will fall at the first hurdle.

We also believe that the proposal has the value of increasing protection for vulnerable or older people who may otherwise be unwittingly targeted by those seeking to defraud the DWP. In effect, therefore, this amendment broadens the scope of fraud prevention, ensuring that any misuse of benefits by third parties is identified, and that includes those who are acting as a proxy. We argue that this is, in effect, a tidying-up amendment to enhance the measures in the Bill and to ensure that the legislation does not create loopholes before it has come into force.

We have also tabled amendment 25, as we believe that we should add housing benefit to the list of benefits that fall within scope. If we are serious about tackling fraud and error, we should want to expand the relevant benefits as far as we can, while ensuring that the cost-benefit analysis remains proportionate. Although housing benefit is in the process of being replaced as part of the roll-out of universal credit, as of November 2024, 2 million claimants of traditional housing benefit remain. New claims, as Members will know, can still be made for housing benefit by people who have reached state pension age or who live in supported, sheltered or temporary housing. Receipt of benefit is dependent on household income, including savings and capital, among other criteria.

Amendment 25 provides a focus in our debate on economic impact and cost effectiveness. The current accredited official statistics, published by DWP in its report, “Fraud and error in the benefit system”, show:

“The Housing Benefit overpayment rate was 6.3% (£980m) in FYE 2024, compared with 5.7% (£860m) in FYE 2023… Overpayments due to Fraud were 3.9% (£600m) in FYE 2024, compared with 3.5% (£530m) in FYE 2023.”

That represents £600 million of lost taxpayer money. The report continues:

“Under-declaration of financial assets (Capital) was the main reason for the changes across total Housing Benefit overpayments”—

I know that came up quite a lot during our evidence sessions. The report also states that at a total level, capital fraud

“increased to 2.2% in FYE 2024, compared with 1.3% in FYE 2023.”

We know that that is a significant problem. Indeed, as we heard in evidence from the Minister about capital fraud, the amount is eye-watering. Often this is about error, but equally, it does still mean that people fall out of scope for receiving benefits. That increase is statistically significant and highlights why we believe that housing benefit should be brought within the scope of the Bill, if the Government are truly serious about tackling welfare fraud and error.

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Finally, amendment 30, in the name of the hon. Member for Brighton Pavilion, in effect seeks to secure the same outcome as amendment 29. Therefore, our concerns remain the same. The change would remove the flexibility to reflect future benefit changes and deal with developing trends in other benefit fraud and error. I will leave my comments there. We will see how the debate goes before we decide whether to press any amendments to a vote.

[Steve Darling]

I reflect to the hon. Member for South West Devon that accusing somebody of being short-sighted when they have a guide dog with them is a bit of a juxtaposition, but it was taken well.

The Liberal Democrats and I have grave concerns about this Orwellian approach to mass surveillance, and that the proposals are overcooked. I go back to my concerns that the DWP is, sadly, not fit for purpose. One has to look only at the significant delays throughout the system and the challenges within that Department, and yet we are looking at granting it massive, extremely significant powers. The DWP already has the ability to intervene where it suspects fraud, and we welcome that where there is reasonable suspicion, but to actually subject people to this approach is outrageous. Some of the evidence I heard when I consulted people from disability groups is that people with mental health issues may be fearful. They may think, “Because the Government Minister is looking in my bank account, I can’t afford the nice cheesecake from Waitrose. I can only shop in discounted supermarkets because the Minister is going to be watching what I am doing.”

Turning to our amendments, we have grave concerns that the approach could be the thin end of the Government wedge. We have therefore tabled amendment 29 to put a clear restriction on the proposals, ensuring that what is before us is set in stone rather than allowing for mission creep.

On amendment 30, we know from the debacle around the winter fuel allowance that getting pensioners to step up to the mark and claim pension credit has been a real challenge. I also draw the Minister’s attention to the fact that pension credit is an area where there are significantly lower levels of fraud. There are already low levels of fraud generally throughout the benefits system, but the pension credit levels are extremely small.

[Neil Coyle (Bermondsey and Old Southwark) (Lab)]

I think the Conservative spokesperson just gave the figure of £500 million in pension credit fraud and error last year. Is the Lib Dem spokesperson saying that that is not very much?

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[Steve Darling]

We need to make sure that there is a level of proportionality. On pension credit, proportionality suggests to me that pensioners are often extremely private people, and they will fear that the Minister will be looking through their shopping bills. Although there may be reassurances, this is still the presentation of what parts of our society may see as a Big Brother state. We have concerns about the impact, and by excluding pension credit specifically through amendment 30, we would serve some of the most vulnerable people in our society in the best way we can.

[Siân Berry]

It is a pleasure to serve under you again, Sir Jeremy. I rise to speak against clause 74 and schedule 3, and to support my amendment 35, which I intend to push to a vote. I also support the two Liberal Democrat amendments, and will vote for those if they are pressed.

In short, I am opposed to clause 74 and schedule 3 standing part of the Bill, and to the related powers that apply to the eligibility verification process. These powers do nothing less than bring in a system of disproportionate, mass financial surveillance of millions of people who have done nothing wrong and are not suspected of any wrongdoing. It is of profound concern that these powers are likely to be used at scale to monitor the private bank accounts of people who need the support of society and have done absolutely nothing to arouse suspicion.

One of the changes that people wanted to see when they voted out the last Government was a welfare system that treats people with dignity and respect. Sadly and disappointingly, these parts of the Bill are based instead on blame and suspicion of people in need of help, when the bigger issue is unclaimed and underclaimed benefits due to a lack of awareness, complexity in the system and stigma. I asked the Minister in the evidence session whether he would be using these new powers to also help alert people who are underclaiming benefits to what they may be due. The answer was not very clear, but I think it was no, because only the possibility of overpayments and reclaiming those was discussed.

I do not want to tweak these proposals—I want to prevent these two parts of the Bill becoming law at all, because they would allow the DWP to require banks and other financial institutions to provide information about claimants of universal credit, pension credit and employment support allowance in order to interrogate their claims of eligibility and entitlement. I assume that every claim would be examined over time. That means a huge new invasion of citizens’ privacy.

Currently, if someone is out on the street, the police can only use suspicion-less stop and search on them if they have a section 60 notice in place, which involves setting out a clear reason, identifying a small area and identifying a fixed time for which that would take place. The Bill effectively puts a section 60 notice around every single person who claims these benefits. These people include, disproportionately, people from protected groups—disabled people and older people. This is a real problem; it is discriminatory, unsettling and unfair.

On the numbers, around 7 million people receive universal credit, around 1.4 million pensioners receive pension credit, and around 1.5 million get help from employment support allowance. These powers will drag nearly 10 million people directly into a net of intrusive financial surveillance, as well as those appointed to receive benefits on their behalf, including parents, carers, appointed people and landlords. Given that several of these benefits have eligibility requirements based on household income, we are bringing in family members as well. Unsurprisingly, these measures are of huge concern to disability rights, poverty, pension and privacy groups, who are united in their opposition to them.

Ideally, I want to see everything struck out, but amendment 35 to schedule 3 would at least mean that more benefits could not be added to the list of relevant benefits by regulations. It would leave in place the ability for Ministers to remove benefits through regulations in future.

The hon. Member for Oldham East and Saddleworth (Debbie Abrahams), Chair of the Work and Pensions Committee, set out on Second Reading the risk of damaging trust in and engagement with the DWP for millions of people who might otherwise not claim benefits. I raise that problem because I believe that underclaiming is as much of a problem as fraud and error and should be getting as much attention.

On proportionality, it is incumbent on Ministers to come up with a new, more proportionate way to address fraud, where there is reasonable suspicion. I am not against the issue being looked at, but I add that administrative errors are 8% of the problem. They are caused by the DWP’s mistakes and should not result in a need to treat as suspects people who might make errors in their claims due to lack of clarity in or awareness of requirements.

It is absolutely right that fraudulent uses of public money are dealt with robustly. To that end, the Government already have significant powers to review the bank statements of welfare fraud suspects. Ministers did not hear me complaining at the new powers to require more information when there is a reasonable suspicion of somebody having committed fraud. This eligibility requirement goes way, way beyond.

There are automated decision-making powers coming through in another Bill, which impacts on this Bill and the assurances we have received from Ministers. They say that no automated decisions will be made based on the eligibility verification data alone and that, where potential fraud is identified against those eligibility indicators, cases will be referred to the DWP for further consideration and investigation. However, assurances by the DWP that a human will always be involved in the decision whether to investigate an individual are not set out in the legislation, and the scale and nature of any human input is very unclear, despite its having been promised.

Furthermore, as we heard in oral evidence, while assurances about human involvement are also provided for under current data protection law, the Data (Use and Access) Bill currently making its way through Parliament will remove any proper prohibitions on automated decision making. Those must be included in this legislation, in the code of practice or in the regulations. I believe it is for the Government to produce urgent amendments to solve the problem.

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[Andrew Western]

They would be, were the powers entirely unique. However, as we heard in the evidence of the representative from HMRC, there is a long-standing power—introduced, I believe, in the Finance Act 2011—for HMRC to routinely and regularly check all interest-bearing bank accounts in the country. I have not looked at the cohort of people who are fortunate enough to have interest-bearing bank accounts, nor have I ever been in such a position myself, so I plead ignorance here. However, I suspect that there is not the same over-representation of vulnerable groups.

The important point—this comes back to the broader point around automated decision making, AI and so on that the hon. Member for Brighton Pavilion made—is that we are looking to better improve our access to data, not take decisions as a direct result of the information we have received. Indeed, we have built in human decision making at every stage of the five areas where we are taking new or updated powers on the DWP side of the Bill.

[Steve Darling]

I referred to the proposals as Orwellian, and my concern goes back to “Animal Farm” where the notice was amended to read:

“All animals are equal, but some animals are more equal than others”.

We have this perverse situation with the legislation where for some sections of society it is appropriate for the Government to use AI to go through their bank accounts, and for other sections of society it is not appropriate to use AI to go through people’s bank accounts. How does that lead to a society that is cogent and speaks together? Or is this just sowing division around our communities?

[Andrew Western]

It is incredibly important to reiterate for anybody who may be watching our proceedings that the Government will not be going through anybody’s bank accounts. We will be asking banks and financial institutions to do that, and to share information with us only where there is a potential breach of eligibility verification. The information that is shared with us will be specifically related to identifying the bank account and the potential breach of eligibility. It will not be, for instance, special category data or transactional data.

To return to my point about the use of AI and automated decision making, when a flag comes back on the eligibility verification measure, a potential breach of eligibility will immediately be passed to a human investigator to take that forward. It will not at any point trigger a penalty or a prosecution for fraud without a human intervening and, as they do at present, establishing that there is potentially fraudulent activity or, indeed, an error that warrants a reclamation of overpayment.

Amendment 30 seeks to stop the DWP from being able to use the eligibility verification power in respect of pension credit. We have had quite the debate about that already, and the hon. Member for South West Devon made many of the points that I would have made.

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[Andrew Western]

I am happy to confirm that the situation is as the hon. Lady articulated. Only someone in receipt of one of the three benefits initially in scope would face use of the eligibility verification measure.

[Steve Darling]

Will the Minister confirm whether, once the Bill has passed, he could choose to increase the scope to include all pensioners?

[Andrew Western]

That brings me to amendment 25, which seeks to include housing benefit, and to later amendments on the affirmative procedure regulations that we propose for being able to bring other benefits in scope. We would need to do that to reflect the changing nature of fraud and the fact that fraudsters, unfortunately, change their behaviour and the benefits they target depending on the safeguards in place and the extent to which they are effective. Therefore the answer to the question is yes, and I will say more on that when we come to the specific amendments in that space.