Public Authorities (Fraud, Error and Recovery) Bill

Second Reading

12:34:00

Moved by

That the Bill be now read a second time.

My Lords, I am proud to bring this Bill to your Lordships’ House with my noble friend Lady Sherlock. I am grateful for the engagement that we have had with noble Lords on the Bill so far and look forward to working with your Lordships as the Bill progresses. I also look forward to hearing the maiden speech of the noble Baroness, Lady Spielman, which I am sure will be excellent—good luck! There have always been people who commit fraud. Sadly, this is not a new problem, but over the past decade fraudsters have become increasingly sophisticated in the techniques that they use to steal people’s money, using data, technology and a variety of scams. Banks and similar entities have transformed their ability to spot and stop fraud and to protect their customers’ money. They have invested in new technology and changed processes, but this Government believe that the public sector has not proactively followed their lead. In 2023-24, fraud and error against the public sector reached an astonishing £55 billion. That includes: fraud against our public services, including those who abuse the tax system; fraud by dishonest companies that use deception to win public contracts; and benefit fraud by criminal gangs and individuals. In 2024-25, benefit fraud and error stood at a staggering £9.5 billion a year. Fraud against the public sector is not a victimless crime. It takes money away from vital public services, erodes trust and harms innocent people. It is ultimately public services that suffer, and it is taxpayers who are the victims of this crime. They are rightly incensed when their money lines the pockets of criminals. It is theft from the taxpayer—from every single one of us. Delivering this Government’s plan for change is possible only if we do more to ensure that taxpayers’ money is protected and spent wisely. The Government made a manifesto commitment that they will safeguard taxpayers’ money and will not tolerate fraud or waste anywhere in public services. This Bill is part of our plan for delivery. I turn to the detail of the legislation before us. Part 1 of the Bill contains measures that gives the Public Sector Fraud Authority—I will refer to it as the PSFA for the rest of my speech—within the Cabinet Office powers for the first time to tackle fraud across the public sector on behalf of government departments and public bodies that do not have the capability, capacity or powers to do so. Noble Lords will know that the scope of the activity of the state is vast. Fraudsters will attack vulnerabilities wherever they can find them, and the impact is not just on the state but on real people. For example, in a case referred to the PSFA earlier this year, a firm had received £370,000 in funding to provide skills training, having, it is believed, provided false or inaccurate details to create the false impression that the criteria for the funding scheme were met when in fact they were not. Not only does the fraudster gain, but the money is diverted from people who could legitimately benefit from it. In another example, a grant of £125,000 was awarded to a youth group focusing on community activities. It did not go to the intended purpose but was, it is believed, defrauded. That money would have had a direct impact on the ground in the community, but did not, because we were defrauded, as were that community. At the moment, however, it is difficult for public authorities that have been defrauded, or the PSFA or other authorities, to take the kinds of actions that the public expect against these and other much larger frauds that take place. It is extraordinary that they cannot get the necessary information to prove the offences and do not have the powers to take enforcement action or recover funds. Part 1 of the Bill puts this right. It builds the foundational structure for a long-lasting change in how public authorities take action on fraud where they cannot do so now. First, the Bill will provide the PSFA with powers to obtain search warrants from the court to enter premises and seize evidence as part of fraud investigations. So in the skills case I mentioned, the PSFA would have been able to go into the so-called provider’s premises and seize payroll and enrolment records to prove whether it was entitled to the funding. These powers will be used only when approved by the courts, and the police will continue to be responsible for arresting suspects if required. Secondly, the Bill contains measures for the PSFA to compel businesses and individuals to provide information where there is a suspicion of fraud against the public authority, and to penalise them if they do not. In the youth group case, PSFA could have required business records to be provided using these powers. Separately, the Bill also provides powers to allow the PSFA to request communications from telecom providers using the Investigatory Powers Act 2016, authorised and overseen by the Investigatory Powers Commissioner’s Office. When fraudsters conspire to attack the state, this power will enable investigators to connect to their network and show who is involved. The Bill also enables information-sharing between the PSFA and other parties in the course of a fraud investigation, which is vital in tackling multi-agency cases. Thirdly, the Bill introduces the power to impose civil penalties on behalf of other public authorities against those who have committed or have tried to commit fraud. These penalties can be used as an alternative method of taking action against fraudsters, compared to often lengthy criminal prosecutions. The introduction of civil penalties for fraud means that there can be meaningful consequences for breaking the law, even when criminal prosecution is not appropriate or viable. Fourthly, the Bill will introduce new debt recovery powers for the PSFA, so that we can get public money back from those who can afford to repay but refuse to do so. This includes powers to recover fraud-related or error-related debt from an individual’s earnings, using a deduction from earnings order, or directly from financial accounts using a direct deduction order. These are broadly similar to existing powers used across government, including by HMRC. I reassure your Lordships’ House that there will be strong safeguards in place for these powers, to ensure that vulnerability is considered and deductions are affordable and fair. The PSFA’s authorised investigators and officers will be highly trained, to the same standards as the police, for the criminal powers in Part 1 and will be members of the Government Counter Fraud Profession, which sets high standards of professionalism, ethics and integrity that members must meet. Finally, to address some of the fraud we saw over the pandemic, the Bill will double from six to 12 years the time limit for civil claims to be brought in alleged cases of Covid fraud, giving public authorities more time to investigate complex cases relating to those who exploited a national emergency for personal gain. It is an affront that some people used the time of a national crisis to loot the public purse, and this Government are committed to taking action, of which this is the first step. Part 2 is focused on addressing fraud and error in the social security system. Here, the Bill will modernise, extend and strengthen DWP’s existing counter-fraud powers, bringing it in line with other bodies such as HMRC. It introduces new powers that will improve DWP’s access to important data that can be used to find and prevent fraud and error more quickly and effectively and, crucially, improve DWP’s ability to recover money from taxpayers. Taking each of these in turn, first, there are comparable powers to those I described for the PSFA, which will allow authorised investigators in the DWP to apply for and obtain search warrants to enter premises and seize evidence relevant to fraud investigations. These powers will be used by specialist DWP serious and organised crime investigators. This will reduce DWP’s reliance on the police and, as in the PSFA’s case, these powers will be used only when approved by the courts; the police will continue to be responsible for arresting suspects. Secondly, the Bill will update DWP’s information-gathering powers for investigating fraud. At present, DWP has the powers to require information from only a limited list of third parties. This does not include key organisations and sectors that could help to prove or disprove suspected fraud—for example, airlines, which might hold travel records that are relevant to investigations of fraud conducted overseas. To add to that, there is limited ability to require responses to requests to be sent electronically; currently, DWP cannot make someone provide this information digitally. This approach is somewhat outdated in a digital age and underlines that the changes in the Bill are long overdue. The Bill widens who the DWP can compel information from, and it will enable us to require the information to be provided digitally by default. This is comparable to the information-gathering provisions I described for the PSFA earlier. Thirdly, the Bill makes provisions for the DWP’s new eligibility verification measure, which will enable the department to require banks and other financial institutions to provide crucial data to help identify incorrect benefit payments that people might be getting as a result of not meeting the rules for their benefit—for example, if someone has too much in savings, which could make them ineligible for a benefit, or if they are fraudulently claiming benefits while living abroad when they should be living in the UK. This data will mean that we can identify potential incorrect payments much sooner for key eligibility criteria. We know that people lead busy lives and sometimes genuine mistakes happen. That is why this measure is so important, as it will help to identify not only potential fraudulent cases that require further investigation but errors too, ensuring that the DWP can correct errors quickly, and preventing people building up large debts that they then need to repay. In response to considerable misinformation about this measure, I want to stress to your Lordships’ House that under the eligibility verification measure, the DWP will not be able to access people’s bank accounts or look at what they are spending, nor will it be able to share any personal information with banks. Furthermore, this data will be considered without the presumption of any wrongdoing. No decision about benefit entitlement will be made from the data gathered through this measure alone; and, crucially, any final decision about someone’s benefit entitlement will always be taken by a human being. The Information Commissioner has noted that this proposal addresses many of the concerns the commissioner held about the previous Government’s proposals. The fourth element of Part 2 is about broadening DWP’s abilities to punish fraudsters using a financial penalty as an alternative to seeking prosecutions. At the moment, DWP can give financial penalties only in cases of benefit fraud. Part 2 extends our ability to use them in the cases of fraud against any type of DWP payment. For example, if we have a future grant scheme similar to the Kickstart employment scheme, we will be able to ensure that that money could be recouped. This will ensure that more fraudsters committing a wider range of fraud can be dealt with swiftly without going to court. Finally, the Bill contains new debt recovery powers for DWP. These powers will enable the DWP to recover money in cases where a person owes the department money but is not in receipt of a benefit or in Pay As You Earn employment, where there are existing powers. This will be used only where people repeatedly refuse to agree to affordable voluntary repayment terms with DWP. In these cases, the Bill will enable DWP to obtain from banks the bank statements of these debtors, to verify that they have sufficient funds to pay. Having considered this information, DWP debt enforcement agents will determine what is an affordable deduction, with maximum limits for regular deductions set out in the legislation. DWP can then recover the money from their bank accounts, through either a one-off lump sum or regular deductions. This will be done in a fair and manageable way, with time for the person to make any representation, and the right to appeal. No one will be pushed into hardship because of this action. As a last resort, if someone owes DWP more than £1,000 and puts their money out of reach of our other recovery methods, DWP can apply to the court to disqualify that person from driving for up to two years. This is similar to the powers the Child Maintenance Service has been able to use for the last 25 years in cases where a parent repeatedly refuses to make payments to support their child, and it has proved somewhat effective in encouraging debtors to engage with the process. A court will not be able to make a DWP disqualification order if it considers that the person needs a driving licence for work or for another essential purpose, such as if the person is disabled or a carer. This disqualification order will always at first be suspended, and repayment terms will be set by the court. A person will be disqualified from driving by the court only if the repayment terms the court has set are not met without good reason. This measure is for people who have repeatedly refused to engage with DWP’s debt management system and have actively frustrated the process of debt recovery. It is an important power that is designed to bring debtors to the table to agree voluntary, affordable and sustainable repayment plans with the DWP. We are clear that an individual keeping money to which they are not entitled is serious and will result in serious consequences. These powers ensure fairness in debt recovery, seeking to guarantee that those who are no longer on benefit or in paid employment are not treated more favourably and able to evade repayment of money owed to the public sector. Parts 1 and 2 come with strong new safeguards, including provision for independent oversight and reporting. The Cabinet Office and the DWP will commission His Majesty’s Inspectorate of Constabulary and Fire & Rescue Services to undertake inspections on the use of the new investigations powers that both departments are using. The DWP will make a similar arrangement with His Majesty’s Inspectorate of Constabulary in Scotland and the Independent Office for Police Conduct will handle any serious complaints that arise from the use of the new powers of entry, search and seizure for the PSFA and the DWP. The Police Investigations and Review Commissioner will deal with similar matters for the DWP in Scotland. Separately, the Minister for the Cabinet Office will appoint an independent person to inspect the PSFA enforcement unit’s use of the powers in the Bill. Their work will complement and build on the oversight provided by the inspectorate. The Secretary of State for Work and Pensions will also appoint an independent person to oversee the use and effectiveness of the DWP’s new eligibility verification measure in line with the legislation and the code of practice. Both independent persons are required to provide reports to respective Ministers which must be published and laid in Parliament. Codes of practice will accompany relevant parts of the Bill and, where appropriate, will be consulted on. Drafts of relevant codes will be made available to noble Lords ahead of Committee. Across the Bill, provision is made for persons subject to the powers to make representations, request reviews or appeal against decisions. These routes will be clear and provide opportunities to challenge the Government’s approach. Many of the measures in this Bill are not novel to government. Instead, they modernise existing powers and bring the DWP and the PSFA in line with other public bodies, such as HMRC. Overall, this Bill will help deliver the biggest crackdown on public sector fraud in a generation. It is expected to save £1.5 billion over the next five years as part of wider action in the DWP’s efforts to save £9.6 billion. The Bill delivers the biggest upgrade to the DWP’s counterfraud powers in more than 14 years. It brings in new powers to tackle fraud right across the public sector by empowering the Public Sector Fraud Authority, and not before time. Our approach is tough but fair. It is tough on criminals who cheat the system and steal from taxpayers, and tough on people who refuse to pay back money, but fair on claimants, by spotting and stopping errors earlier and helping people to avoid getting into debt. It is fair on those who play by the rules and rely on the social security system, and it is fair on taxpayers, by ensuring that every pound is spent wisely, responsibly and effectively on those who need it. I beg to move.

12:52:00

My Lords, it is both a pleasure and a privilege to open my remarks by looking forward to and welcoming the maiden speech of my noble friend Lady Spielman. Throughout her career, she has embodied the highest ideals of public service: courage in the face of complexity, integrity under pressure and an unswerving commitment to the public good. We are fortunate to have her voice in your Lordships’ House. The Public Authorities (Fraud, Error and Recovery) Bill arrives with a plain but powerful ambition: to protect public money from fraud. On this side of the House, we welcome that ambition, support it and wish to see it succeed. I have a note here to thank both Ministers, but I genuinely mean it when I say how wonderfully constructive they have been and how massively informative in the briefing sessions. I also thank the officials, who have patiently responded to numerous queries and questions posed. But let me be clear: support for the goal must not mean silence about the means. As the Minister said, fraud is theft from the taxpayer and an insult to every citizen who plays by the rules. Every pound stolen is a pound denied to pupils in our classrooms, patients in our hospitals and families in need of homes. To tolerate fraud is to tolerate contempt for those who entrust us with their hard-earned money. We must act, but we must act wisely. Before I entered your Lordships’ House, I worked across several departments of government, including the Cabinet Office during the coalition years when my noble friend Lord Maude of Horsham led vital reforms to introduce efficiency savings in government. We learned then what remains true now: fraud is not merely a technical failure; it is a cultural one. We encountered resistance. It was not indifference exactly, but something worse: a quiet preference for ignorance; a fear that exposing long-running frauds might implicate those who should have stopped them; a culture in which it was safer to overlook than to uncover. Ambition became cautious and initiatives dwindled to a timid “proof of concept” exercise. Today it is called “test and learn”, yet 15 years later one wonders how much more learning we really require. What of the Cabinet Office’s role in this Bill? The Government propose granting expansive new investigatory and enforcement powers to the Public Sector Fraud Authority within the Cabinet Office. These powers include the authority to compel sensitive financial disclosures, seek court warrants to enter premises and seize evidence, access personal bank records without any duty to inform those whose accounts are being accessed and impose substantial penalties. All such powers are to be exercised administratively by officials ranked no higher than higher executive officer and without explicit ministerial authorisation. Clause 3 permits officials to compel citizens to reveal extensive financial details. Clause 7 grants powers akin to those of police to seek warrants for searches and seizures. Clauses 50 and 53 enable officials to impose civil penalties without sufficient scrutiny. Yes, the Bill proposes an independent reviewer under Clause 64 to oversee these powers, but a closer look reveals that this reviewer possesses no statutory authority to halt or reverse potentially abusive or inappropriate decisions. Even more concerningly, their terms, resources and remit are entirely controlled by the Minister whose decisions they are tasked to oversee. Such arrangements risk creating oversight in name only—an illusion of accountability rather than genuine scrutiny. The Cabinet Office’s enforcement unit, we are told, will lead this charge. But who are they? How many officials are there in this unit? To date, we have been told it is 25, but will this information be published? What expertise do they possess and what data will they use? These questions remain unanswered. It remains entirely unclear precisely what types of fraud these sweeping new powers will enable the Cabinet Office to investigate. The Government’s Explanatory Notes suggest that the Public Sector Fraud Authority will focus on fraud beyond the traditional domains of HMRC and the DWP. Yet this raises an immediate bureaucratic contradiction. If departments currently lack the powers or resources to tackle such fraud effectively, surely the logical step would be to empower them directly. Conversely, if departments already possess sufficient powers but prefer not to use them, we risk creating a perverse incentive for them to keep straightforward fraud cases in-house while transferring politically sensitive, legally complex or reputationally hazardous investigations on to the Cabinet Office—effectively outsourcing responsibility for difficult decisions. Even more troublingly, the Cabinet Office is under no statutory obligation to accept cases referred by other departments, and the Government have provided no clarity at all regarding which types of fraud the Cabinet Office intends to investigate or decline. Compounding this confusion, the Cabinet Office has recently announced significant staffing cuts. We therefore face the surreal scenario of departments attempting to offload their most complicated and resource-intensive fraud cases on to another department that is undergoing headcount reductions and will therefore be ill equipped to pursue them. The inevitable outcome will be bureaucratic gridlock, with challenging cases bouncing endlessly between departments, responsibility blurred, accountability evaporating and serious fraud quietly slipping into administrative oblivion. The scale of the problem we face is staggering. The National Audit Office reports that detected public sector fraud amounted to £3 billion last year, with the true scale estimated at possibly £28 billion. Benefit payments alone lost £10.2 billion to fraud and error, while temporary Covid schemes were exploited to the tune of £10.5 billion. Yet the Bill’s impact assessment forecasts just £22.8 million as a best-case scenario in financial return from the Cabinet Office’s new powers. We cannot allow a situation where the Cabinet Office is allowed to act like a second-rate bailiff, extracting modest sums through draconian means while ignoring the massive haemorrhage of taxpayer funds that continues in plain sight. This side of the House supports the fight against fraud, but we will not support it blindly. Our goal must be a lean, sharp, just system that deters dishonesty, recovers stolen funds and never forgets the dignity of the citizens it serves. I look forward to today’s debate and to Committee, where this House can do what it does best: improve legislation, ensuring that it not only sounds good in a press release but works effectively in the real world. We share the Government’s ambition and we welcome the Bill’s purpose, but we owe taxpayers something far better than good intentions. We owe them a system that truly works.

13:00:00

My Lords, this is not my usual field, so I shall be listening with great interest to the various speeches, including the maiden speech of the noble Baroness, Lady Spielman. Stamping out public sector fraud, including public authority and welfare fraud, is clearly a priority. These are despicable crimes that undermine our public services and, in the end, hurt the most vulnerable. However, this Bill, at least to my eyes, has some serious flaws. Part 1 focuses on investigation of fraud outside the tax and benefits system. As I read it, I was surprised to find that it has nothing to say on whistleblowing. I am certain that, without a powerful whistleblowing framework that keeps whistleblowers safe from retaliation and leads to investigation, most bad actors will escape investigation. If the Minister doubts me on the importance of whistleblowing, I ask her to look at the speeches by Nick Ephgrave, director of the Serious Fraud Office, who is even willing to incentivise whistleblowers because they are so vital. In April, he told the All-Party Parliamentary Group on Anti-Corruption and Responsible Tax that his number one need from parliamentarians is to get him more whistleblowers. Whistleblowers identify where in the haystack wrongdoing is hidden and provide vital evidence. The noble Lord, Lord Livermore, is more frequently the Minister engaged in debates in which I am involved. In response to a question from me in February, he said: “I met Tom Hayhoe, the Covid Counter-Fraud Commissioner … he told me that he is considering a whistleblowing mechanism to enable the public to draw attention to abuses they are aware of”.—[Official Report, 5/2/25; col. 690.] I ask the Minister to go back and look at this issue, because, if she talks more broadly to investigators, she will discover this is a critical area which needs to be seized upon immediately. On the second part of the Bill, I take on board the concerns of UK Finance that the Bill risks not achieving its objectives. The role given to banks to verify eligibility for benefits and recover money seriously needs a rethink to provide proper customer safeguards. It makes no allowance for people of low financial capability, for example, nor even for those hiding funds to escape domestic abuse. I am really concerned that it creates two classes of citizen: those with full rights in our society, protected by the FCA’s consumer duty, for example, and a lower class, defined as benefit recipients, who are investigated without cause and treated as a suspect class. Listening to the finance industry, it is absolutely clear that bad actors, especially the gangs, will have no difficulty at all working around all the new rules and programmes. The Minister must be aware that any serious crackdown on fraud has to tackle the organised crime gangs who conspire to commit welfare fraud on an industrial scale. Last year, one gang alone was convicted of defrauding £53 million of universal credit. That was a very rare success, unfortunately. Since I cannot find it anywhere, can the Minister say today what percentage of welfare fraud is the work of these organised gangs? I suspect that the number is very large. The main tool in this Bill is to initiate fishing expeditions and, from wide experience across the fields of investigation and fraud, they are the laziest and most ineffective way of fighting wrongdoing. If anyone doubts the capacity of the DWP to get schemes such as this one wrong, look at the carer’s allowance scandal, which particularly exercises my colleagues. My noble friend Lord Palmer of Childs Hill will elaborate, but 136,730 people are at present caught in outstanding debt for carer’s allowance overpayments which were not their fault, but for which their lives are being devastated. I fear that, in the way this Bill is crafted, they and people like them will be among the primary targets, even though they never actually committed fraud; they just failed to understand impossibly complex rules or to identify the DWP’s mistakes. The DWP must of course crack down on fraud, but it needs to be informed by best practice. On that basis, I believe this Bill needs a significant rethink.

13:05:00

My Lords, it is always a pleasure to follow the noble Baroness, Lady Kramer, who I think was rather underplaying her expertise in her comments. There is a certain level of déjà vu about this Bill, as has been mentioned. Many of us spent a lot of time debating its predecessor, under the previous Government, and it is nice to see at least some of the band getting back together. I acknowledge that this reincarnation has been significantly improved from the last version, and the changes go a long way towards dealing with many of the issues that Members from across the House raised last time round. I hope that my desire to clamp down on fraud is well known, and I completely understand the need to try to reduce the roughly £10 billion in annual losses to fraud and error that arise in the social security system. So I broadly support the strengthening of the powers set out in Part 1, although I share some of the concerns raised by the noble Baroness, Lady Finn. I cannot help but suspect that concentrating on the capabilities and competence of the agencies that should be investigating and recovering fraud losses would be likely to achieve more. The utter uselessness of the National Investigation Service in recovering Covid fraud losses is a good example. It seems to have cost more to run than it has recovered, and I note from today’s Times that it is about to be closed down. Most of my comments will concentrate on Part 2, which relates to the social security aspects. First, there is the question of the proportionality of the measures. I have been struggling to understand the impact assessment; like most of these things, it is an awful lot of pages and not a lot of information—it really is time the Government got their act together on impact assessments. As I understand it, the measures will initially raise less than £180 million a year, rising to £500 million after 2030. I would be grateful if the Minister can confirm the actual number, if I have got that wrong. Set against that are the direct costs to the department of around £42 million per year, and the costs that the measures will impose on the banks that will have to provide the information, which the impact assessment makes no attempt to quantify. Can the Minister provide any update on what those costs are expected to be and whether the banks will be reimbursed for them? That net recovery is a very small proportion of the estimated losses: 2% to 5% recovery is a very small return when set against the imposition of what is a very intrusive power that will force banks to scan all their accounts for benefit payments and eligibility indicators. It is worth pointing out that this scanning requirement is not a one-off; it is potentially effectively continuous for periods of up to 12 months, which can be extended as and when. Let us be clear that, while the banks will provide information to the DWP only on those accounts and connected accounts which meet the criteria set out, in order to achieve that the banks will have to scan all accounts to find the information. The Government already have significant powers. What assessment have they undertaken of what could be achieved if those existing powers were used more effectively? It would be much better to prevent fraud and error in the first place, rather than after the event. Is the Minister satisfied that the DWP is doing everything reasonable to that effect? Levels of fraud and error seem extremely high. Surely there is more we could do up front, which might remove the need for some of these changes. A redesign of benefits and claim processes, such as removing cliff edges—the carer’s allowance is a good example of that—or making the process clearer and easier could go a long way to reducing claimant error. For example, we know that the pension credit forms are so long that they put people off even applying. Then there is the philosophical question of carrying out blanket surveillance without suspicion. This raises the danger of making benefit claimants feel like second-class citizens and spied on, and that we inherently distrust them. Disability groups have already raised this concern, and today’s report from the Work and Pensions Select Committee reinforces it. According to its chair: “We heard evidence that the process … of engaging with the DWP … too often led to mental distress … Deep-rooted cultural change of the DWP is desperately needed to rebuild trust”. It is quite hard to see how the measures in this Bill will contribute to rebuilding that trust. Another philosophical question is whether it is right to treat fraud and error in the same way, particularly when the error is by the DWP and not by the claimant. The Minister rightly referred to some of the new safeguards that have been introduced into this incarnation of the Bill, and I will probe a few of them. A number of codes of practice must be issued under the Bill before actions can be taken. I was going to ask, “When can we see those?”, but I am very grateful that the Minister has confirmed that we will see them before Committee. Instead, I just ask: can they be sent directly to those of us taking part in this debate, and as soon as possible before Committee, so that we have time to digest them? The Minister has explained that only very restricted information can be requested from the banks, and I agree that that is a significant step forward from what we had before. However, that could be undermined by the enhanced investigatory power clauses, which will allow much more intrusive information to be to be obtained if DWP has reasonable grounds for suspicion that a person has committed an offence. Does the existence of an eligibility indicator under the verification processes constitute reasonable grounds for suspicion? If that is the case, it would drive a coach and horses through the safeguard of restricting the information in the first place. Related to that, what are the consequences of an eligibility indicator being raised? What further investigations need to be carried out before, for example, a benefit is put on hold? I have heard a number of times—it was repeated earlier—that a human must be involved in any such decisions, but I can find nothing that says that in the Bill. Can the Minister point me to where that is? I have also heard nothing about what level of human interaction that will constitute and what level of seniority and qualification is required. I also welcome the introduction of the independent reviews of the exercise of these new functions. However, the provisions for these independent reviews are somewhat lacking: they do not set out the timings, they are very limited in scope and there is no definition of what would constitute an “independent person”. In particular, the independent reviewer will not be required to opine on the proportionality of the powers and their use, which is a very serious omission. I am sure that we will revert to those matters later in the process. The eligibility verification rights are limited to three specific benefits—universal credit, employment and support allowance, and pension credit—which, again, is another improvement on the previous version. I was quite surprised by the inclusion of the last one, as the main issue with pension credit is that it is woefully under claimed, rather than there being too much money being paid out. I am interested to understand why that was included. Those three can be added to by regulation, so are there any plans for them to be added to? There is also an obvious loophole in the eligibility verification process, because it applies only to linked accounts within each single bank. A fraudulent claimant can easily avoid that by having accounts in different banks. Does that mean that deliberate fraud is unlikely, in practice, to be identified under this Bill? That would somewhat reduce its point. Has that loophole been taken into account when calculating the expected savings? As the noble Baroness, Lady Kramer, mentioned, the banking industry has also raised some concerns about the Bill, including—among other things—potential conflicts with its existing financial crime duties; possible tensions between the Bill and firms’ existing consumer duty and vulnerability guidance; the diversion of resources from wider economic crime capacity; and issues around safeguards for bulk data access. I would be interested to understand what meetings the Minister has had with organisations such as UK Finance to ensure that such concerns have been, and will be, addressed. There are lots of other matters that I could raise, but given the time, I will raise just one more: the driving licence disqualification clauses. That seems extremely arbitrary, so I would like to understand more about the logic that was applied to that and what other measures might have been considered. I acknowledge that the Bill has been greatly improved from its previous incarnation, but quite a lot of issues remain. The Minister has been generous with her time and, as always, constructive in her approach, so I very much look forward to further discussions and debates as we go through the next stages, as well as to the maiden speech from the noble Baroness, Lady Spielman.

13:14:00

My Lords, I am very glad to see the name of the noble Baroness, Lady Spielman, on the speakers’ list for this debate; I look forward to her maiden speech and her future contributions to this House. We all need to acknowledge the understandable frustration, felt from government downwards, about waste in public spending and fraud perpetrated at the public’s expense. It is right that expenditure be managed carefully, ensuring that people receive support when they need it, and eliminating fraud and error within the system as far as that is possible. At the encouragement of my right reverend friend the Bishop of Leicester, who much regrets that he cannot be in his place today, I will focus on the second limb of this Bill, which concerns individual claimants of social security. This is a matter of morality. To support people into work, where they are able; to ensure that people can enjoy an acceptable standard of living when they cannot work or to top up their low income; and to deliver a fair and sustainable social security system now and in the future: these are all moral imperatives. Addressing fraud and error—ensuring that government can recover money when required—is also a morally vital matter of maintaining public consent, which should be a welcome outcome of this proposed legislation. Put simply, our social security system must both be fair and be perceived as fair by the public. There is clearly work to do to rebuild trust in the system, which includes the trust of claimants that support will be there for them when they need it, and that they will always be treated with dignity. As one ingredient of a fair system, we need to ensure that people receive the benefits to which they are entitled. The Government’s efforts to encourage take-up of pension credit is a good recent example of that. There may be circumstances when benefits are left unclaimed for good reasons, but most often this occurs when people do not realise there is support available to them. If this is about access to information, we must do more to inform. If it is about stigma, we must state clearly that our social security system, like our schools or our health service, is a public good on which people should not be ashamed to draw when required. I welcome the department’s plans to review and improve its safeguarding practices through wider reforms on disability benefits. Ensuring that people are always treated with respect is a necessary step towards earning trust, and it is particularly timely—as the noble Lord, Lord Vaux, pointed out—that this debate coincides with the publication of the Work and Pensions Select Committee report on safeguarding claimants. Fraud, error and recovery will inevitably overlap with the department’s safeguarding responsibilities, and that committee’s report highlights some of tragedies that have happened to people—made particularly vulnerable by their circumstances—who interact with a system that can often feel complicated and impersonal. I wish the Minister and her department well in reviewing safeguarding and in making the important changes needed for the sake of those people. The expansion of social security means that millions of people are potentially within the scope of this Bill. Half of all children live in a family that interacts with the system in some form, and there is concern that expanding the DWP’s recovery powers through direct deduction orders might risk affecting children at risk of poverty. It would be good to have the Minister’s reassurance about the affordability assessments to be made before recoveries occur. There is considerable concern too, already voiced in this debate, about removing driving licences and the comparatively low threshold at which this could happen, even if court approval must be sought. This too could impact children who are not at fault for the actions of their parents, as they might miss out on activities, opportunities and vital services if their parents are no longer able to drive—this is particularly an issue in rural areas. At a time of competing priorities and limited financial resources, a Bill that focuses on cracking down on fraud has arrived in this House before the publication of the child poverty strategy. In the diocese where I serve, I hear more about the latter than the former, and the Government should be wary that the Bill does not inadvertently limit their room for manoeuvre in reducing child poverty. I also wish to express some concern or caution about the risk of overreliance on automated algorithmic systems to monitor the bank accounts of welfare recipients. With any reliance on automated systems, we know that there is a chance for error, presenting a risk of false positive matches. Errors resulting in wrongful benefits investigations would have profound consequences for some of the poorest people in society, disproportionately impacting disabled and elderly people, carers, single parents and those seeking work. While occasional human error is inevitable in the maintenance of a complex system, there is a need to ensure that we harness technology appropriately and always involve people in potentially sensitive decisions affecting them. The Government have included in the safeguards for the Bill that there will be human intervention in further investigations—of course, I welcome that—but I urge them to clarify how they will ensure that there is indeed human oversight and whether a human being will be involved in the initial decision on whether to investigate an individual. At their heart, the issues we are considering today are not only about money, they are about people. The Bill presents an opportunity to deal with one challenge facing the social security system, and I look forward to hearing how it ties in with other important issues in that area that the Government are seeking to address.

13:22:00

My Lords, I too look forward to the maiden speech of the noble Baroness, Lady Spielman, and I congratulate her on her having a debate to herself in that regard. My antecedents rather precede me: I am a Scot, and we worry about money. I am a Presbyterian Scot, and we worry even more about money. Finally, I have endured more audit committees than I care to recall. I say to the noble Lord, Lord Vaux, that I was not here the last time he got the band together. As a newbie, I am glad to come to this debate. I concur with the right reverend Prelate, who we have just heard from, on the underlying rationale of the Bill: the importance of fairness, building trust and upholding the integrity of the system. I want to explain why I think that has come into question. The public want prudence from the Government, an attention to waste and a tackling of the criminal gangs. The Bill is not the performative legislation that we have perhaps seen too much from all sides over the years. It is about modernising the legal framework, tackling the criminals and building confidence in the system and reliability and fairness into our social security system. I concur with the noble Baroness, Lady Finn, that tackling fraud is as much a cultural issue as a legislative one, but I also disagree with the noble Baroness, Lady Finn, that we should not concentrate power in the Cabinet Office. It is not an error to build specialist expertise to support cross-government action. Indeed, building specialist expertise is an enabler of broader action. It has to be right that all of government has access to the powers that the DWP and HMRC already have. It has to be right that the PSFA—I will not trouble your Lordships with the full acronym—should have the statutory powers and not be reliant, as it is now, on whoever brings information to its attention. It is also right—and it has not been mentioned much today—that the Bill strengthens the specific enforcement powers for the £10 billion lost through Covid-related fraud. I will share just one anecdote with the House on this matter. I am, as declared in my register of interests, the British Council’s vice-chair. In Covid, when our teaching exam centres were closed, the FCDO provided a Covid-related liquidity loan of £200 million. The Treasury now wants it repaid in full, and the British Council happens not to have the resources to repay. So at this week’s board meeting we authorised cuts, closures and a VS scheme to help pay back that Covid-era loan. Those British Council employees who last month applied for the VS scheme want to know that the Government are being equally assiduous in chasing down the dodgy companies which deliberately mis-sold PPE to a nation at the heart of a national emergency. I turn to Part 2 of the Bill, which I had assumed would be the most controversial. I want to address the issues we have heard about concerning the scale of fraud. The key insight, as others have said, is that fraud is low for most benefits: for personal independence payments it is zero; for attendance allowance it is zero; for the state pension it is 0.1%; for incapacity benefits 0.3%, and so on. The fraud rate for every benefit sampled is below 4%, with the exception of universal credit: for universal credit, the fraud rate is 11%. There is limited fraud in the system, but universal credit stands out. The overall scale of overpayment each year is £10 billion: three-quarters relates to fraud and 88% relates to universal credit. That is the issue that needs to be addressed. It has to be right to bring enforcement into the 21st century and not require the DWP, as the Minister has said, to rely on 20 year-old regulations that simply are not fit for purpose in a digital age. They are also not fit for tackling organised crime. Here, I talk about the benefit gangs. This time, I turned away from the dry DWP statistics, and I turned to the court reports, and they are both frightening and illuminating. In May last year, just after Rishi Sunak announced the election and when the business managers in this place and in the other place were horse-trading which legislation would make it onto the statute book, in that very week, at Wood Green Crown Court, there was the case of five defendants who admitted stealing over £50 million from the taxpayer. It involved 5,000 to 6,000 fraudulent universal credit claims, with some people living, as we have heard, in Bulgaria. The putative claimants received the money for just two months, and then the gang kept the rest for themselves. These false claims were backed by an array of forged documents, burner phones and photoshopped pictures. The raids on one of the defendants’ flats turned up £750,000 in cash. It was billed as the UK’s biggest ever benefit scam. However, this was not an isolated incident. In 2022, there were similar court reports and more bogus benefit claims and money laundered through cryptocurrency transactions. In fact, in late 2022, the Public Accounts Committee was demanding action—finally, here we are. I will sum up the concerns that have been raised about the specific enforcement measures in the Bill. It is common ground that the DWP needs to harness data. It is almost common ground that the investigative legwork should not fall primarily to the police but to trained investigators. It is largely common ground that we need to move away from self-reporting by claimants as the basis for eligibility. I say to the noble Lord, Lord Vaux, that, quite simply, the public want the Government to check claimants’ eligibility. So the question is whether we can be assured of the proportionality and effectiveness of the eligibility checks. Many of the fears that have been raised can properly be allayed, but there are one or two that I want to touch on. The DWP will not be able to access bank accounts, yet we must tackle the gangs. I disagree with the fatalism of the noble Baroness, Lady Kramer, that the gangs will evade anything that we do so we should not bother with deeper investigatory powers. The reality, as we all know, is that fraudsters have, in recent years, become increasingly sophisticated in the ways that they steal people’s money. The banks have risen to that challenge when it comes to their own customers, and we are simply asking them to step up in the same way on behalf of the taxpayer. I urge the Government—this has come up—to be careful in the selection of the individual who oversees eligibility verification measures to ensure that they are independent. All noble Lords know that it is not easy to criticise a government department from the inside. Look at the experience of prison inspection over two decades: it is a challenge to speak up. I suggest that it is a role for a courageous leader, and I encourage the Minister, my noble friend Lady Sherlock, who will sum up, to look for someone like herself. In her former life, on the advocacy side, she was a fearless champion of fairness. In her summing-up remarks, I would welcome her assurance, as we have heard today, that the independent person’s annual report will be laid before the House and properly debated. In conclusion, it must be right that fraud in the public sector is an evolving challenge and that legislation needs to keep pace. It is right to enable better recovery where public money has been stolen or overpaid. People want to see us tackle fraud, waste and criminality. By tackling those who exploit the system and recovering the money for those who need it, we will, as the right reverend Prelate said, uphold the integrity of the system and trust in government. I commend the Bill to the House.

13:32:00

My Lords, it is a pleasure to follow the noble Baroness. I hope I match some of her enthusiasm, but she may be disappointed. I begin by drawing attention to my practice at the Bar, which includes acting for and against the Serious Fraud Office. It additionally involves advising on civil fraud matters. I am also the patron of the Fraud Advisory Panel—a charity with offices at and financially supported by the Institute of Chartered Accountants in England and Wales, and supported by a number of law, accountancy and forensic investigation firms, and related professionals and academics. In essence, it exists to improve professional and public awareness of fraud and what can and should be done about it. Last month, the Home Office Minister, the noble Lord, Lord Hanson of Flint, kindly gave the keynote address at the FAP’s annual fraud conference and I am very grateful to him. I hope that noble Baronesses on the Treasury Bench will pass on my thanks for his taking the time and trouble to set out the Government’s thinking and intentions on tackling fraud. I will not do much more today than express a few platitudes and then, in agreement with my noble friend Lady Finn, remind us to be careful what we wish for. As the noble Baroness, Lady Alexander, indicated in her powerful speech, fraud is an insidious crime. Because there are no broken bones or blood on the carpet, because it frequently requires a high degree of ingenuity and because, as often as not, the fraudster is mysterious—perhaps hiding in plain sight or far away behind a computer screen—the crime of fraud does not seem to attract public disapproval in the same way as crimes of violence. I regret that, sometimes, fraudsters are admired for their brains while their criminality is forgotten or ignored. In short, fraud is a nasty and brutal crime that can ruin lives, hurt the vulnerable and cause untold economic misery. Whether it is committed, and its consequences felt, here or abroad, it is universally to be condemned, as are the dishonest spivs and criminals who carry it out. Fraud accounts for 40% of crime in this jurisdiction. In welcoming my noble friend Lady Spielman and in looking forward to her maiden speech, I warn her that I have, over the years, become something of a cracked record on the subject of economic crime and the need to increase the weapons that this jurisdiction has at its disposal to deal with it. I have argued long and hard, but not always successfully, for the increase in the ambit of the criminal “failure to prevent” regime. The Economic Crime and Corporate Transparency Act 2023 introduced provisions relating to the corporate failure to prevent fraud offences. Those provisions will come into force this coming September, so no one could accuse this or the previous Government of undue haste. However, those provisions will affect only large organisations, defined as those meeting at least two of three criteria: a turnover of over £36 million, a balance sheet of over £18 million, or more than 250 employees. That, as I have never been slow to point out, covers only 0.5% of the United Kingdom’s corporate economy and is the equivalent of prosecuting only burglars taller than six feet six. I apologise to the noble Lords, Lord Vaux and Lord Cromwell, and to the noble and learned Lord, Lord Thomas of Cwmgiedd, because they have heard me make this tired joke endlessly, particularly during the Committee and Report stages of the Economic Crime and Corporate Transparency Bill. I am sure that they are heartily sick of it, but I am still unconvinced that that limitation was either necessary or sensible. There are many large artillery pieces before us in the Bill, which are designed to smash fraud in the welfare system, in government more widely and in other sectors. But do those guns come with gunners and shells? In imperial China, the warlords who fought their local rivals knew that they could succeed because they had no fear of an empty cannon. If their revolt was against the Emperor’s rule, they could comfort themselves with the thought that heaven is high and the Emperor is far away. Local and effective action is required to defeat fraud. Is this Bill, like most criminal justice Bills, far too long, overcrowded with extraneous provisions and designed for its rhetorical effect rather than to improve the investigation and prosecution of fraud? Until the police outside the City of London Police are once again resourced, staffed and trained to understand and deal with fraud—to gather the evidence and to present it coherently to the Crown Prosecution Service for it to prosecute—the types of fraud that do not currently attract the attention of the SFO, which is concerned with large and complex financial crime, will, I fear, continue to go largely ignored or be brushed aside. The duty officer at the police station will continue to sigh sympathetically and simply tell the poor victim to see a solicitor. If a large proportion of the 40% to which I have referred is beyond the capacity of the police to cope with, we will have a problem and your Lordships’ House should require some convincing that the measures in the Bill, well intended as they may be, will hit the target. Have the Government audited the work of the Public Sector Fraud Authority and do they have any empirical evidence that increased Cabinet Office involvement will achieve what is promised by the Bill? The noble Lord, Lord Vaux, in his delightfully quizzical way, made some highly important and effective points, wrapped up in questions that this Government must answer. We all look forward, either later today or in Committee, to his receiving the answers. Finally, I refer to some arguments raised in the other place about state interference in the private affairs of others without adequate due process. To take just one example, the now Independent but former Labour Member of Parliament, Zarah Sultana—so no political ally of mine—complained when the Bill was being discussed there that there are “powers in the Bill that force banks to trawl through our private financial data, scanning for indicators of fraud and error—indicators that are not publicly disclosed—and flag those individuals to the Government. These powers will allow the Department for Work and Pensions to seize money directly from bank accounts without due process, suspend driving licences and even search properties and personal devices. They are not the hallmarks of a free and democratic society but the tools of an Orwellian surveillance state”.—[Official Report, Commons, 3/2/25; col. 611.] Whether that Member of Parliament is exaggerating or not and whether she is right or wrong, the Government must meet those arguments with seriousness and persuade us that they are behaving in a proportionate and humane fashion in putting those measures into the Bill. Like my noble friend Lady Finn, I am concerned that Ministers are giving themselves powers to take punitive actions without the intervention of the courts or adequate ability for respondents to make representations on their own behalf. This is not just a question of process but of constitutional propriety. Finally—this question has been raised on a number of occasions this afternoon—will the Department for Work and Pensions’ driving disqualifications affect the cost of drivers’ post-disqualification vehicle insurance? We need clarification on this so that we are not double penalising those who fail to pay their DWP debts.

13:41:00

My Lords, I support the Bill and thank my noble friend Lady Anderson for her opening remarks. I am grateful also to other noble Lords for the sizeable support for the urgency of our situation and the aspirations of the measures in the Bill. I also look forward to the maiden speech of the noble Baroness, Lady Spielman, in just a few moments. A hero of mine once pointed out to me that all financial documents are moral documents, and all financial policies are moral policies. While the measures that this Bill seeks to address are clearly fiscal, the motivations are rightly and justly moral. In the time available I will limit my remarks to the first part of the legislation. I spent much of the Covid pandemic working with charities and churches, faith communities and local community groups, supporting the most vulnerable members of our community. While these organisations spent huge amounts of time and money to ensure that neighbours had food and pharmaceuticals, and worked to reduce loneliness and isolation and increase take-up of the Covid vaccines—among other heroic acts of service—other, unscrupulous actors took every opportunity to pick the public pocket, fraudulently redirecting essential emergency funding, purposed for the most vulnerable, into their own get-rich-quick scheme. In a tragic turn, some of the same charities and community groups that saved lives in the pandemic have not themselves survived the Covid recovery. While these groups faced increased costs and diminishing donations, even greater demand for their services and near devastating cuts in government funding, the vast majority of those who defrauded the Government continue to enjoy the benefit of their ill-gotten gains, collectively to the tune of almost £10 billion. Although, according to the NAO, more than £4 billion was lost through fraud and error through the Bounce Back Loan Scheme, and almost the same amount through the Coronavirus Job Retention Scheme, for many charities bouncing back has been altogether more difficult, and in some cases, impossible. In the longer term, many former employees in voluntary sector and civil society organisations have not retained their jobs and have been subject to redundancy. More worrying still, as the noble Baroness, Lady Finn, remarked, a criminal culture of fraud has been cultivated during and since those Covid years. The National Audit Office cites that this type of fraudulent activity has only grown in the four years since, and without action, it will clearly continue to do so for some time. Decisive action is clearly needed, and the measures outlined in the Bill are precisely what is needed. I agree wholeheartedly with my noble friend Lady Anderson when she says that this legislation is both “tough and fair”. The measures in the Bill are timely and necessary. They will enable the Cabinet Office to deal more effectively with cases of fraud and error outside of the benefits and tax systems. I agree with the noble Baroness, Lady Alexander, that it makes a great deal of sense to give these powers to the Cabinet Office, and to develop the necessary expertise to deliver them. These powers and processes, readily available to certain other government departments, will provide the Cabinet Office and Public Sector Fraud Authority with the capacity they need to pursue those who perpetrated Covid fraud, along with other instances in the future. I hope that, at a time when all noble Lords are anxious to protect the public purse, this legislation offers a route towards effective action and an efficient means of redress. By providing the Cabinet Office and the PSFA with the necessary powers for information-gathering, dissemination of information, search and seizure and the collection of communications data, we will enable the Government rightly and fairly to identify where significant fraud has taken or is taking place. By providing the rights and approving the methods by which to recover these moneys lost to fraudsters, and by providing a framework for Ministers to impose civil penalties, we empower the Government to take action to recoup losses and ensure that justice is done. Furthermore, as has already been pointed out, if banks are using ever more sophisticated digital resources and capabilities to reduce the painful impact of fraud on individual members of the public, it follows that government should work with banks to reduce the negative impact of fraud on the public more broadly. By prolonging the timeframe within which Covid fraud can be investigated and the perpetrators dealt with, we can maximise the moneys returned to the public purse, bring to book those who continue to benefit from a crime against their country and their neighbours, and send a clear message that a toxic culture among some, whereby fraud is considered a lesser crime, will not be tolerated—without breaking bones or spilling blood, as the noble and learned Lord just said. As I understand it, only £1.5 billion of the Covid fraud moneys has so far been recovered, which means that there is a lot more to be done and a lot more time is needed. Finally, as already stated, these measures are tough and fair. The Government’s insistence on oversight and safeguarding requirements is welcome and necessary. It clearly makes sense to use legislation such as the Police and Criminal Evidence Act and models of investigation and action that are established in law and already effective in practice. The proposal to use the HMICFRS as a specialist inspectorate, along with the appointment of an independent chair and oversight team in the PSFA, should provide proper oversight to ensure that the Bill is implemented effectively and fairly. At a time when millions rely on food banks and wider social support from the kind of charities and civil society organisations that we have mentioned earlier—and which served so faithfully through the pandemic—every penny stolen from the Government is a penny that cannot be used to help the most disadvantaged to escape poverty. Those who have defrauded the public purse are not simply stealing from the Government’s bank account; they are stealing from their neighbours, from those most in need, from those who are more deserving of our support and most in need of our care. This Bill seeks redress at least some of the damage done by those who have all too easily defrauded the public in years gone by; puts vital measures in place to confront a worrisome criminal culture which has become all too prevalent in our country; and provides a means by which to deter and deal with such behaviour in future. With this, we return to the start. Financial documents are moral documents, and financial policies are moral policies. As noble Lords together, I hope that we will provide moral leadership in passing this Bill. I commend it to the House.

13:48:00

My Lords, I am sympathetic to the Government’s aspirations to tackle fraud and to reclaim money, in effect, ripped off from the public purse. Whether it is those grants for fake community schemes mentioned by the noble Baroness, Lady Anderson of Stoke-on-Trent, at the beginning or the more mundane benefits cheats, there is nothing more galling for the public than people who exploit the system. For those who work their guts out and struggle to make ends meet to see a minority claiming benefits that they do not have a right to and yet seeming to have a better standard of living than the people who are working so hard, it can be and is infuriating. Yet I have some serious reservations about how the Government are approaching this, and parts of the Bill, at least, feel like a sledgehammer to crack a nut. There is a nagging feeling that the Government are going after low-hanging fruit and that it has become a distraction from the real culprits and deeper problems—indeed, some dodgy schemes created or allowed by the DWP. In the recent furore about the apparent ease with which some could use the Motability scheme to access fancy cars, for example, and to get state-paid insurance, excise duties, servicing and breakdown cover, the upset was, of course, not about a scheme that allows those with disability to access transport to aid their independence—the British public are fair like that; they want that. Rather, it seemed to me that the upset was because legitimate systems were set up by the private company that ran Motability that were there to be played. It was not fraud, but there were lax assessments and a management who never queried why its customer base swelled by 14.7% in the last year, and executives who were awarded eye-watering pay bonuses and who boasted that their scheme was the largest car buyer in UK and doing a public service by promoting electric vehicles to help deliver the transition to greener transport. Maybe that is why the Government turned a blind eye to what obviously needed to be tightened up. I therefore think that there is more going on when it comes to welfare being exploited than this Bill sometimes allows. When I first heard about the Public Authorities (Fraud, Error and Recovery) Bill, no disrespect, but it sounded a bit dull, technical, workmanlike, and I thought, “I won’t bother with that; I’m not going to get involved.” The problem was that I then read it. There is a good reason why it has been labelled a Big Brother deal, a snoopers’ charter allowing mass surveillance of those who get means-tested benefits—we heard some of the concerns from the noble and learned Lord, Lord Garnier. I agree that one of the most contentious parts of the Bill, as we have heard from other noble Lords, is the eligibility verification measures, which, frankly, I find quite worrying. The Government seem, however, to be quite matter of fact about this new requirement ensuring that banks and financial institutions trawl through their datasets to highlight where someone may not be meeting the specific eligibility criteria for certain benefits. Apparently, the attitude is that if it helps the DWP identify incorrect payments and verify or otherwise claimants’ entitlement to public money, it is okay—that is the justification—but I feel queasy. I also think that it is peculiar that we think it is okay for the DWP to outsource the dirty work to private third parties that are, first, unaccountable to the public but also being forced to do a job the DWP should be doing itself. Coercion is involved; the banks do not have a choice. They are not being asked whether they want to do this. They will be served with a special eligibility verification notice setting out the specific information that the DWP requires, and there will be penalty notices for non-compliance. This seems an example of huge state overreach. It will also mean that banks, building societies, et cetera will have to trawl through all account holders’ databases to identify which match search criteria supplied by the DWP—criteria, by the way, which are not available to us as legislators to scrutinise, nor, in fact, to the banks. Therefore, I understand why Big Brother Watch, Privacy International and other civil liberties organisations have invaluably raised the alarm about what have been labelled “bank spying powers”. Ministers have responded by suggesting that this is alarmist hyperbole—a kind of “Nothing to see here”. I appreciate that this Labour Government have drafted this Bill more tightly than the previous Conservative Government’s version. Yes, it is good that the Bill limits the powers of eligibility verification notices to request only information about accounts in receipt of three named benefits—that is good. However, from reading the Explanatory Notes it is clear that, while initially only those benefits will be looked at, the Bill contains the authority for the Secretary of State to expand the range of benefits covered at any time in the future, with Parliament reduced to a nodding-dog status rather than us being able to debate it. I am sure that all these details will be subject to debate and amendments in Committee, but for now we should take a step back and note that, whatever smoke and mirrors the Government deploy, the fact is that some people on benefits—as well as, by the way, people with associated accounts, who may be their carers or guardians; that is, account holders who are not even on benefits—will be subject to having their private financial data pre-emptively monitored, intruded on by banks and other financial institutions, in case they are involved in fraudulent activity, all without their knowledge and all because of coercive orders given out by the state. In the other place, there was an interesting amendment tabled by Labour MP Neil Duncan-Jordan. He sought to limit the exercise of an EVM to cases where the welfare recipient was suspected of wrongdoing and expressed concerns about “the slippery slope of compelling banks to act as an arm of the state”. The Government’s rebuttal of that amendment was revealing. Mr Duncan-Jordan was told that this would “undermine the measure entirely”, as powers in the Bill are not intended to deal with suspected fraud but to “help check that claimants are meeting the criteria for their benefit and to detect incorrect payments at an earlier stage before any suspicion of wrongdoing has arisen”.—[Official Report, Commons, 29/4/25; cols. 243-251.] This is suspicionless surveillance, which I do not think is a good answer to the problems that we are trying to tackle. I argue that the Government should note that, on principle, we should not intrude on citizens’ bank accounts without very good reason. It risks an important commitment to the “innocent before proven guilty” point by treating all those on certain benefits as would-be criminals by default. Some might say, “Civil liberties be damned: it is all worth it to crack down on cheats and reclaim all that misappropriated money”. However, we must remember that, even by the Government’s own analysis, if this measure works—this unprecedented bank intrusion—it is expected to recover less than 3% of the estimated annual loss to fraud and error. Beyond bank spying, there are parts of the Bill that also make me gulp. I will not go into most of them, but does the Minister think that boasting about the use of non-criminal penalties is appropriate? It is explained as a benign way of reducing the burden on the courts, which can be costly and time-consuming, and that civil penalties will show that there are meaningful consequences for breaking the law, as we heard at the beginning, even when criminal prosecution is not achievable—that is, there is not sufficient evidence to get a conviction. Should we be welcoming this non-optional use of civil penalties because they have a lower burden of proof, being on the balance of probabilities rather than beyond reasonable doubt? It is easier to convict and find someone guilty if due process is sidelined. Other people have mentioned the danger of aligning fraud and error. Even though the Government go to great lengths to distinguish between them, when it comes to detection and recovery they are indistinguishably punitive. Also, too often, as we have heard from others, overpayment errors are the fault of the DWP, yet little attention is paid to this failure in the Bill. A freedom of information request has revealed that, in 2023-24, nearly 700,000 of the new universal credit overpayment debts entered on to the DWP’s debt manager system were caused by government agency mistake. Yet this Bill’s powers focus on making claimants pay the price. In an insightful article, Siân Berry MP quotes—someone whom I do not usually agree with—the CEO of the Public Law Project: “No one is expecting the DWP not to make any mistakes. However, it is incumbent on the department to take responsibility for those mistakes, rather than pushing that burden onto people it should in fact be supporting”. While this Bill is keen to punish even those who make unintended errors—perhaps not supplying the correct paperwork or missing deadlines—the Government could be accused of equal negligence. In reply to lots of the issues raised today, the Government will tell us that much of the detail on safeguards, procedures, appeals and fines will be contained in three key codes of practice, yet not even drafts of those codes of practice were published before the Bill finished in the other place, and we will not get them—if we do—until Committee. This breaches the spirit of the official Guide to Making Legislation, which sets out the procedures by which a code of practice should be made available in order to properly consider the appropriateness of statutory provisions. We do not have them. I say to look to ourselves before we start overpunishing the most vulnerable. I hand noble Lords over to someone far more edifying. I am delighted that I will be followed by the noble Baroness, Lady Spielman. I have long admired her and often agreed with her from afar. I hope that her credibility will not suffer from my endorsement, by the way—she may feel free to distance herself. I look forward to hearing her maiden speech and many speeches that she will make in the future.

14:00:00

My Lords, like so many who have stood up here for the first time, I am profoundly aware of the privilege it is to speak here and of the importance of using that privilege responsibly and well, for the public good. I have much to learn from all noble Lords. I am especially grateful to my supporters and my mentor—the noble Baroness, Lady Wolf of Dulwich, and my noble friends Lord Finkelstein and Lady Bloomfield of Hinton Waldrist—and many other noble friends. I am beginning to understand the strength of collegiality and mutual support that characterises this House, and I hope that I will succeed in upholding this. I sound very English, and I bear a German surname, but I come here with connections to many parts of the UK. My father was English, from the Midlands, and my mother is Irish. I was brought up in Glasgow, though I lost my childhood accent when I came south to study. I also came to know something of Wales over seven fascinating years on the board of the Wales Millennium Centre. I am here because I have spent over 20 years working in the interests of children and young people. After some years in investment banking, I recognised—slightly belatedly—that my real interests lay in education above all else. I spent seven years as part of the founding management team at Ark Schools, an excellent academy trust, then nearly seven years as chair of Ofqual, the exam regulator, overseeing a full programme of qualification reforms. Most recently, I served for seven years as Ofsted chief inspector, where we made an inspection model based on professional dialogue, grounded in evidence and emphasising educational substance and integrity. It may be a surprise that I am making my maiden speech on this Bill, but Ofsted inspects many services for children and young people and, in some cases, regulates them too. In its work, Ofsted sees many excellent things: often great services run by principled and highly skilled people, but also things that we would all wish did not happen and tend to avoid talking about, including fraud. More generally, Ofsted does sometimes have to report findings that are profoundly uncomfortable for those whose failings are exposed. Incompetence is one dimension; ethical slippage is another. I use that term because fraud, which is the main focus of this Bill, sits at one end of an ethical spectrum. Some behaviour can be considered unethical to a greater or lesser extent. For example, it is worrying when the interests of children are subordinated to those of adults, contrary to the principles that underlie the policies of successive Governments. It is not criminal, but it can harm children. It is shocking that there are a few people in control of children’s education and welfare who choose to operate outside the law, sometimes even after a criminal conviction for the same offence. When ethical slippage is normalised, it becomes harder for other adults to sustain their own purpose and integrity. Cultures are corroded, and actual fraud becomes more likely. To spell it out, when people see others around them successfully cheating a system, at least three bad things happen. First, and most immediately, it gives people an incentive to join the cheaters. This costs the public purse and the taxpayers who fund it. Secondly, it corrodes mutual trust in communities. A sense of community derives in large part from a social contract founded in reciprocity: if we no longer believe that those around us will contribute to mutual support when they are able and draw on support only when they need it, we lose some of our sense of community. My noble friend Lord Finkelstein wrote very well about the importance of reciprocity in the Times this week. Thirdly, we become cynical about public authorities if we see them as incompetent and ineffective at preventing, detecting or sanctioning the behaviours that are undermining our sense of community. A loss of confidence in public authorities is destabilising for government and hard to redress. Low mutual trust in communities and in government is not conducive to individual happiness. All this makes it important to address fraud and error promptly and effectively, and I welcome the efforts of successive Governments to strengthen this work. Deterring fraud requires a high likelihood of detection, as well as meaningful sanctions where fraud is found. I will not repeat what has been said by others today, but important points have been made. I will make a few observations from my own experience, having had ultimate responsibility for the regulatory sanctioning process in a range of cases. The protections for individuals are, of course, very important, but they must be proportionate and properly balanced with a legitimate public interest of deterring and sanctioning fraud. Where protections are extensive and elaborate, the complexity and cost of taking a case of suspected fraud through to its conclusion are high. This can contribute to the creeping inertia highlighted by my noble friend Lady Finn. For individuals, those strong protections can mean longer processes, and protracted processes are in themselves more stressful at the receiving end. If it becomes even more expensive to investigate a case, public authorities are forced to prioritise the most blatant and expensive cases over lesser and more marginal cases. For example, where the total loss from a fraud is small in absolute terms and where any meaningful recovery is unlikely, it is harder for a public body to justify the cost of investigation and lesser cases are pushed down the queue. Yet inaction in the lesser cases—the broken windows, if you like—still triggers the undesirable social and economic consequences that I have already talked about. The aggregate benefits and costs of embedding strong individual protections must therefore be regularly reviewed and weighed against the wider public interest, not just in financial terms. This should, of course, include regular system-level sense-checking, and swift adjustment of schemes and processes where needed. The agencies and bodies that do this difficult work have to be well supported. Among the millions of decisions made by public authorities, there will always be difficult and borderline cases. Where, say, a claim in such a case is properly refused, it can be easy for a disappointed claimant to paint the public body and the individual decision-makers as soulless and unfair. Yet that authority and its staff should not be casually vilified. True fairness to all citizens, young and old, and maintaining that all-important social contract, depends on those people having the skills and confidence to make those difficult calls—humanely but without partiality. I emphasise to noble Lords that the success of these well-intended reforms depends on collective support for the people who carry them through. Without this, the reforms could come to little. To end, I thank your Lordships for listening to me. My watchwords in my previous life were “substance and integrity”, and they will continue to be my watchwords here.

14:08:00

My Lords, it is a huge privilege to follow my noble friend Lady Spielman after her exceptionally thoughtful, insightful speech to the House, indicating very clearly the experience she will bring. It is no surprise that somebody obviously very bright who did a mathematics degree at Cambridge University became a chartered accountant. I understand she is super-fabulous at XL spreadsheets, a skill I am sure we can use to interrogate all sorts of statistics coming out. After a successful career in finance, she saw that particular moment that called her to try to improve lives, particularly those of young people. She took on a master’s, I think it was at the University of London’s Institute of Education. Most people will know my noble friend Lady Spielman from her role as the chief inspector at Ofsted, but she also spent five or six years as chair of Ofqual. Speaking to people who worked with her at that time, one of the things that they particularly valued about her was her ability to bring together a top-class board to try to help through some of the challenging times and to make sure that Ofqual continued to be there, focused on the quality of education and, importantly, the young people it was there to serve—substance and integrity coming through again, as we saw in her role at Ofsted. My noble friend said to me that, in essence, making sure that children got the best start in life was key, and she believed that the way to achieve that, as we saw, was substance and integrity in the education they had, so that they were well prepared for the future. We saw this in a different way because, before then, my noble friend had been a founding member of the Ark Academy. Anybody who has been to an Ark Academy school will know how brilliant they are, so that is a lifelong legacy of which she should be rightly proud. Perhaps going to Ofsted may have seen a slightly different approach on perhaps the harder side of some aspects of education, but I think that experience of what could be done is why we have seen the number of schools that are now excellent rise significantly. We have seen the educational attainment of children rise, which is not solely due to my noble friend, but, as a previous colleague of hers said, nobody knows education better in the round than my noble friend Lady Spielman. I think it is fair to say that I had limited interaction with my noble friend when I was a Minister. I remember a couple of discussions and all I will say is that she had certainly acquired the teacher’s look. My parents were both teachers. She had a warm smile, as we have seen today, but she knew her stuff and she also knew how to get her point across. Outside this House, my noble friend is currently a trustee of the Victoria and Albert Museum. She is obviously a lady of culture, but there is another element that I appreciate. My former MP is in this House as my noble friend Lord Young of Cookham. He used to be known as “the Baronet on a bike”. Well, we now have a Baroness on a bike. There is almost nowhere that my noble friend will go without it involving two wheels rather than four. We saw in the quality of the debate today how my noble friend will contribute to many issues, and it is now to that that I turn. This Bill is important and I welcome the fact that we finally have something to get going. I say that with genuine passion and I congratulate the Government on getting under way. I am conscious that, under my Government, while I set out a strategy three years ago in May 2022, it contained the classic phrase “when parliamentary time allows”, and it was a frustration of mine that we did not get it going until quite late on and, as I will explain, in my view some of the measures had changed since I was in office as Secretary of State for Work and Pensions. It felt somewhat, to be candid, as if they had been watered down. That might be in recognition of some of the issues raised across this House, but, as the tone of my speech I hope will show, I do not think this Bill goes far enough, and I will be encouraging the Minister to look again at what they could perhaps do. Let us get some statistics right. It has been well said by the noble Baroness, Lady Fox of Buckley, that we should think about where the DWP has not made sure that people have the money they are entitled to. I think that is in the region of £1 billion per year, 0.4% of the £292 billion that DWP paid in the last financial year. The figures are stark. I congratulate all the people at DWP; I am sure Ministers will take credit for it, and that is okay, but I know there is a great legacy of activities that we got under way, recognising that it was simply unacceptable to have fraud in our system of well over £7 billion. The figures that came out this morning show that fraud is estimated to be £6.5 billion, of which claimant error is £1.9 billion and official error for overpayment £1 billion. That fraud has come down from the previous financial year, from £7.3 billion for fraud and £1.6 billion for claimant error, so, unfortunately, claimant error appears to have gone up, as indeed has official error, in cash terms. It is easy to get into stats about percentages and similar, and I understand why, but cash is real. When I was at the department, I probably got some of the policies that were presented to us today and I said, “We have to go further, because this is real money”. It is the difference about whether you build a hospital or not. It is the difference about the policy that has now happened about winter fuel payments. It is the difference about aid overseas. It is the difference—call me a traditional Conservative—about actually not spending that money but reducing our debt mountain and therefore some of the interest that we pay. Of course, it could then lead to other uses of spending, but it is important that we recognise that this is real cash. That is why I am keen to point out that I understand why people have concerns about the variety of powers. I do not intend to comment so much on PSFA, but I hope the Government will take the opportunity to make it a slightly better, snazzier snap, as it were, in terms of making sure that the public know that we are actually serious as a Parliament about recovering money from criminals. Some of the powers that I have heard about seem somewhat draconian. However, given what I am about to say, perhaps I will not be quite so sceptical when we go through Committee. With regard to the other significant amount, that is where the proposals—as has already been caught by the noble Lord, Lord Rook, and the noble Baroness, Lady Fox of Buckley—are actually about trying to avoid claimants making errors in the first place, although the definition of claimant “error” can sometimes be a bit generous, rather than being “fraud”. Nevertheless, we should do whatever we can to prevent people not necessarily having the right claim and make it easier to make sure that their records are up to date, otherwise we end up with the uncomfortable situation with, for example, carer’s allowance overpayments and people being expected to pay back a lot of money for not realising some of the changes. If there are ways that we can do more of that, that will be helpful. I know the DWP already has the powers to go into HMRC and PAYE, and that has helped to tackle some of this, but powers are necessary to go further. As I say, even just the debt owed at the end of the last financial year was nearly £10 billion, and that is still a substantial amount of money that is owed from benefits. In terms of thinking through, I could go on about, frankly, callous criminals trying to use the welfare system as a cash machine rather than thinking of the most vulnerable, whom it is there for. We need to make sure that this money is well spent and reaches the people that it is supposed to. I know that Covid was particularly difficult. I am not going to go back over Covid history, but I will point out that the DWP has been good at trying to absorb and use technology. For example, over just one weekend we managed to stop £1.9 billion going to organised criminals—money we would never have got back. The DWP successfully prosecuted a gang for fraud that involved only—sorry to sound glib about it—£68 million. Nevertheless, it is that sort of sophisticated approach that has led to the DWP upgrading its powers and use of technology to make sure that taxpayers’ money goes to the people Parliament has decided deserve, need and should have that money. It is vital we keep that in mind. There are a variety of things that could be done to identify and stop abuse of the system through retrospective claims and similar. It is important we continue with that. On some of the powers people may not be aware of, we—sorry, I mean the DWP; it is still in my heart and my DNA—have the powers to go after named individuals, but it is a very time-consuming process. This is approach is intended to be somewhat more comprehensive, and this is why we need to go further. Government technology has evolved so much, but the same is true for the criminal. The banks have written to us with their concerns about potential conflicts. I can assure the banks that there is no conflict concerning a Government and a Parliament that want to stop criminals getting money to which they are not entitled—money that has the potential to improve people’s lives. There is one thing I agree with the banks on. The risk with the legislation as it stands is that could be too easy for criminals to quickly find a workaround that may not necessarily be obvious. One of the gaps in the legislation is that it tends to go after the bank accounts that benefits such as universal credit are paid into. I do not know about other noble Lords, but I have at least four bank accounts, and I can move money between them within seconds. These are issues we were looking to address, and I am not sure if they are covered in the Bill. You would be surprised to learn how many people—British citizens and others—are getting benefits in this country but are not living here and spending that money abroad. The Government should have access to such approaches, so that they can deal with this issue comprehensively. As the noble Baroness, Lady Anderson, said, this is not about presuming someone is guilty. The issue at the moment with getting these extra bits of information is that you have to demonstrably show that you think the person is guilty. There is a mixture of issues at hand. There may be concerns from the ICO but, as I say, this is about taxpayers’ money that could be used better. There is also a gap. I do not know why the DWP is not being given arrest powers, like HMRC. A lot of this legislation is supposed to be aligning the powers available to everybody, so I hope we can address that. I am probably out of step with many others in the Chamber in this regard, but let us think in a different way. The British Crime Survey is about how people perceive crime—how they feel that they have endured crime—and 40% of crime now is fraud. We have done something to address that by making banks pay back money that perhaps should not have gone out of people’s accounts. Nevertheless, do not be surprised that fraud happens, but be pleased to some extent that the figure for fraud and error is now 3.3%. I would like to see it a lot lower, and a cash figure put on it, but we should be careful. There is a lot of scaremongering, but I genuinely believe that the British public want to make sure that fraudsters and criminals do not get a penny, and that the money goes to the most vulnerable.

14:25:00

My Lords, it is a pleasure to follow the noble Baroness, Lady Coffey, and I take this opportunity to congratulate the noble Baroness, Lady Spielman, on her splendid and insightful maiden speech. I look forward to hearing more from her in this House. A focus on fraud detection, prevention and recovery is most welcome, but I seek some clarity in this Bill. Since the abolition of the Audit Commission, the focus on efficiency and effectiveness of local government spending has been diluted. If we have not got the appropriate regulatory structure for public bodies, it is very difficult then to impose another structure and say that we are somehow going to deal with fraud. We have to remember that the public sector is not hermetically sealed from the private sector, and that the proceeds of fraud always go through financial institutions. When we look at those, we find that the regulator’s public interest duties are increasingly eclipsed by a duty to promote industry, growth and competitiveness. The experience of tackling fraud in this country shows us that that is secondary to political conveniences. For example, existing laws are not really enforced, and successive Governments have gone out of their way to protect crooks. We are still waiting for an investigation into the 1991 closure of the Bank of Credit and Commerce International. It has not even begun. In 2012, HSBC was fined $1.9 billion in the US for money laundering. The then Chancellor, George Osborne, and regulators combined to urge the US authorities to go easy on the bank. There has been no UK investigation into that to date. Despite requests which I made ever since I have been in this House, no statement has been made to explain the cover-up by Governments and why they tolerated criminal conduct by HSBC. Frauds at HBOS going back over 20 years have yet to be investigated. The FCA, the SFO, the police and the Treasury passed the buck to Lloyds Bank, which promised a report by 2018. To this day, no report has bene published. In Written Answers to me in this House, successive Ministers have excelled at doing absolutely nothing. There were fewer than five prosecutions of the enablers of tax evasion in 2023-24. Big accounting firms that advise the Treasury and the Government never get investigated for crafting tax abuse schemes. The Criminal Finances Act 2017 was introduced to tackle corporate tax evasion, but to this day no prosecution has taken place. In December 2022, the Government sued PPE Medpro for alleged fraud, but the case has yet to be heard in the courts. England and Wales have a backlog of 75,000 Crown Court and 310,000 magistrates’ court cases. It is extremely unlikely, I am afraid, that we will be able swiftly to prosecute fraud. Nothing in the Bill curbs the political expediency of cover-ups. Perhaps the Minister would like to comment on that. The second part of the Bill, dealing with benefit fraud, grants the Government draconian powers to snoop on the bank accounts of the poor, old, sick and disabled. The Bill assumes that all recipients of benefits have criminal tendencies and must therefore be denied financial privacy. It empowers the DWP to compel banks and financial institutions to examine accounts of benefit claimants and provide specified information to help it verify the eligibility of benefits claimants. The banks are required to develop algorithms to search and report information. The cost of developing these algorithms will be borne by banks and ultimately passed on to customers. Can the Minister say what the initial set-up costs and the annual operating costs for the banks, which will be passed on to customers, will be? For the new unrestrained surveillance, no court order is needed, the affected individuals will not be told and there is no right of appeal against the surveillance. What information the DWP will require has not yet been specified. The Government have promised a code of practice but, as the Minister indicated earlier, that has not yet been published and will possibly not be capable of being fully amended in Parliament, if I understood the Minister correctly. It is likely to be presented as a fait accompli. The requested information probably would relate to some thresholds which, if exceeded, may generate suspicions of fraud. That is itself highly problematic. Suppose you give a loved one a large sum to buy a piece of furniture and that money lingers in their bank account for a while. Will they now be construed as having extra savings and therefore be denied universal credit? Will they be called fraudsters or whatever? A mistake by the reporting bank could have severe consequences for wronged individuals. There are nearly 7 million claimants of universal credit, and an error rate of 1% could cause 70,000 people to lose universal credit. Can the Minister explain who will compensate the innocent people? Bearing in mind the recent Post Office scandal, the idea that computer systems are utterly reliable is simply unacceptable in this case. The Bill does not promise legal aid to enable anyone who is negatively affected by the DWP’s actions to seek advice or represent themselves in the court. How are the poorest people then to get any justice? The DWP can apply to the court to disqualify a debtor from driving, which is absolutely bizarre—why driving licences but not, say, the ability to buy a mobile phone or even join a political party? It is bizarre. The legislation would initially apply snooping powers to recipients of universal credit, pension credit and employment support allowance, but ultimately it is likely to be extended to all benefit claimants. At the moment, the Bill exempts recipients of the state pension, but it does not follow from that that the pensioners will in fact be exempt. For example, 1.6 million pensioners receive pension credit, which opens the door to winter fuel payment and housing and other benefits. Their bank accounts will come under scrutiny. Pensioners are not exempt, contrary to what some are saying. We are all one serious illness or accident away from possibly relying upon social security benefits. Ultimately, all of us will be affected, so it is no good selling the Bill by saying that we are targeting a minority—it targets everybody. What is the extent of fraud that the Government refer to? The 2023-24 figures suggested that benefits were overpaid by about £9.7 billion, of which about £7.4 billion related to alleged fraud, which is based on extrapolation from a sample. That amounts to about 2.8% of welfare spending. The actual percentage of claimants who indulge in fraud is very, very small: 3.9% for housing benefit and 3.9% for pension credit. These small rates do not, in my view, justify powers for suspicionless snooping on the bank accounts of all claimants. One has to ask whether the Bill is even necessary. For example, the DWP currently has the power to compel prescribed information holders to share data on individuals if fraudulent activity is suspected. HMRC already shares banking data with the DWP. Under the Proceeds of Crime Act 2002, financial institutions too must notify law enforcement agencies of suspicious activity. Overpayment constituting fraud and error may also arise from the DWP’s own shortcomings. For example, the form to claim pension credit, which opens the door to winter fuel payment and other benefits for pensioners, is 22 pages long and asks 243 questions. The form to claim PIP is 50 pages long and has intrusive questions about matters such as bathing and personal cleaning. Many people would be embarrassed to answer those intrusive questions and then discuss them with absolute strangers. At what point does an incorrect answer become fraud? I hope the Minister will be able to tell us, because it is a vital question. In principle, anyone receiving public money can commit fraud, but the Bill removes financial privacy only from the poor, old, sick and disabled. It is discriminatory. The normal assumption in law is that people are innocent until proven guilty. The Bill reverses that presumption. It makes a mockery of equality laws and is likely to fall foul of Articles 8 and 14 of the European Convention on Human Rights. Benefits can be received by Britons residing abroad and paid into a foreign bank account. The UK can never acquire the power to snoop on bank accounts subject to another country’s regulatory laws. Will the Minister confirm that anyone who puts money in a foreign bank account will be beyond the reach of the UK Government’s new snooping requirements? Could this encourage some people to deposit their money in foreign bank accounts and thus develop an avoidance strategy? Under the Bill, banks become a de facto arm of the state and can no longer be relied upon to provide confidentiality to their customers. I think that that is a bad thing. As banks bear the cost of surveillance, they might be tempted to refuse bank accounts to recipients of benefits. That too would be a bad development. What safeguards exist to ensure that banks cannot do this? To avoid snooping, landlords might refuse to have benefits paid directly into their bank accounts, a policy that has been pushed by successive Governments, so will the Bill increase homelessness among the poor? Will the Minister publish a list of possible unforeseen consequences and how the Government are going to deal with them? As an academic, whenever I did research and came to some policy recommendations, we always asked what might be the 20 or 30 arguments against our policy, and weighed up the options in light of that. Will the Minister help us to do that? The surveillance initiated by the Bill will not apply to thieves, tax dodgers, money launderers, scammers or company directors disqualified from holding office by malpractices. No one robbing a bank or committing identity theft is to be deprived of a driving licence, but those accused of benefit fraud will be. The Bill seems fairly unfair—at least it looks that way to me—and I urge the Government to rethink parts of it.

14:38:00

First, I welcome the noble Baroness, Lady Spielman, to the House, particularly as a fellow spreadsheet lover. The Public Authorities (Fraud, Error and Recovery) Bill—can I call it PAFERB?—has significant implications for privacy, justice and the rights of vulnerable individuals. I welcome parts of the Bill, but there are significant concerns. I apologise to my Front-Bench friends for highlighting the problems and not the many things in the Bill which are to be strongly welcomed. The concern is that the Bill will introduce an unprecedented system of mass financial surveillance. We should understand that this is something new. It undermines the presumption of innocence that anyone accused should have and it will disproportionately affect people who, by definition, are poor, whether because they have inadequate pensions, are disabled and find it difficult to get a job, or generally struggle to find employment. Attempts have been made to paint a picture of the fraudster. To me, it is the person on a low income who is struggling to cope with their situation. Perhaps they are not as well organised as Members of this House and live in a state of chaos. That is the person I see being affected by this Bill. Clearly, fraud is wrong, but to paint the Bill as dealing only with bad-thinking people is misleading to the House. Who are the fraudsters? Under Part 2 of this Bill, they are people who are already in financial difficulties. Navigating the welfare system is already challenging. Those entitled to benefits will be only further deterred by the threat of surveillance and potential penalties that will exacerbate their difficulties. There is a real concern, which I hope we can address in Committee, that the Bill will create a second-tier justice system for people on the poverty line, treating them differently from the rest of the population. We will no doubt be told of the extensive safeguards being put in place. Unfortunately, for those opposed to the principle of snooping, there is a Catch-22 here: the more safeguards you introduce, the more I worry that those safeguards are required and the proposals are problematic. To the extent that the safeguards weaken the effectiveness of the Bill, it raises the question of whether the measures are required at all. More safeguards clearly mean the Bill is less essential. My first concern relates to the mass financial surveillance—make no mistake, that is what this involves—and the extensive powers being granted to the DWP to assess and monitor the bank accounts of benefit claimants. Such powers amount to what has been described as a “chilling” and “disturbing” level of intrusion, with a surveillance system that treats all claimants as suspects, without any evidence of wrongdoing. Those concerns have been expressed by speakers around the House. My major concern, which we will have to consider in detail—that is why it is so important that we see the codes of practice—is that some of the things that my noble friend said in introducing the Bill are not in the Bill. We need assurances on those issues before we can sign these provisions of the Bill off as acceptable. The key to this is the lack of the need to demonstrate probable cause, which has been widely criticised by civil liberties groups, including Big Brother Watch. They argue, and I agree, that suspicionless financial surveillance treats all claimants as potential fraudsters, infringing their right to privacy without, I emphasise, having to demonstrate due cause. The concern is that this will set a precedent for further unwarranted state intrusion into individuals’ financial affairs in the future. The Information Commissioner’s Office has come back on the Bill and said that some of its concerns have been addressed, but emphasised the word “some”. It still has concerns about the Bill that we have to address. My second concern is about direct deduction orders and the extent to which the legislation will allow the DWP to directly deduct funds from individual bank accounts without a presumption of innocence and what I would regard as proper due process. How can we allow an administrative body to exercise punitive powers without appropriate due practice? Decisions to recover funds or impose penalties should be subject to judicial oversight, to prevent miscarriages of justice. We should remember that the great majority of people who will be affected by the removal of the need for judicial oversight are poor, inevitably in difficult financial circumstances and often in a chaotic administrative state. It is bound to lead to hardship. The Minister said in her introduction that a decision would always be made by a human. I am sorry, but the Bill does not say that. If you read the relevant clause in the Bill, you see that there is no requirement for a human to be involved. Again, this is an issue we must return to in Committee. My third area of concern is the disqualification from driving and the fact that the Bill gives the Secretary of State power to apply to courts to disqualify individuals from holding a driving licence if they have been given too much in benefits and refused to repay the excess. I cannot conceive how anyone thinks this is anything like a good idea, except in trying to achieve a headline in the Daily Mail. Even in principle, how can the ability to drive a motor vehicle be determined by the debts that someone happens to owe to the state? The right to drive a motor vehicle should not be contingent in that way. It is a fact: either you are safe to drive or you are not safe to drive. That is the only criterion that should apply. Even in practical terms, justice should always be applied in an even-handed fashion. Taking away a driving licence will have grossly disproportionate effects on different people. Those who rely on a car to get to work—not for work, but to get to work—will be much worse affected than those who can walk to work. People who run their children to school will be affected much more than those who live round the corner from the school. People who live in urban areas with good transport links, such as we have in London, will be much less affected than those who live in remote rural areas. How can it be just that this form of punishment— and it is punishment—should be handed out in such an uneven fashion? It will also inevitably lead to greater poverty and social problems. The House has to consider this Bill with a precautionary perspective, highlight potential overreach by the Government and identify the risks to individual freedoms and privacy. Someone asked the question: why have the banks not been asked whether they want these obligations? Well, they have been asked. UK Finance, which represents the financial industry as a whole, has provided us with detailed comments on the Bill—as it did on the previous occasion—from which it is clear that the industry does not want to do this. If it has to do it, and it accepts the right of the Government to make the requirement, it sets out a number of criteria that need to be addressed. I am running out of time, even though I have more to say on other issues. The point that really strikes home is that the banks have a duty of care towards their account holders. They tell us that reconciling that duty of care with the obligations under the Bill poses considerable difficulties for them. We have to listen to them: they have been asked and they have expressed considerable practical reservations. My objections are based in principle, but they are still raising practical obligations. Finally, this Bill on fraud and error is currently silent on the errors made by the DWP—I reflect here the remarks made to me by my noble friend Lady Lister of Burtersett, who regrets not being here today. She points out that in 2023-24, almost 700,000 new universal credit official error overpayment debts were entered into the DWP’s debt manager system. Research from the Public Law Project indicates that the DWP’s default approach is to recover all official error overpayments on universal credit, with relief dependent on individuals being able to request inaccessible discretionary measures. The Bill provides an opportunity to correct this unfairness, and my noble friend plans to table an amendment in Committee that would alter the test for the recovery of universal credit official error overpayments so that they could be recovered only where the claimant could reasonably have been expected to realise that there was an overpayment. To conclude, there is much to welcome in this Bill. Public money should be used appropriately, but, ultimately, the measures have to be exercised with greater compassion than we have seen so far.

14:51:00

My Lords, I congratulate the noble Baroness, Lady Spielman, on her maiden speech, and we welcome her to the House. I rise as a Liberal Democrat to speak in firm opposition to the Public Authorities (Fraud, Error and Recovery) Bill. While we all share a goal of preventing fraud and ensuring the integrity of public funds, the Bill, under the guise of fraud prevention, risks entrenching mistrust, undermining civil liberties and further marginalising our most vulnerable citizens. The Minister said that the Bill seeks to challenge the fraud that lines the pockets of criminals—but it goes well beyond that. This legislation should concern anyone who values fairness, proportionality and compassion. My noble friend Lady Kramer spoke about whistleblowing, and I trust that the Minister will also focus on that in her reply. I turn to those in receipt of carer’s allowance. Many of us in this House will have heard the harrowing stories of carers, often quietly heroic individuals, who face harsh penalties for minor and often unintentional administrative errors. They are not fraudsters; they are parents caring for disabled children, spouses supporting terminally ill partners or elderly people looking after loved ones with dementia. The reality is that carer’s allowance rules are notoriously complex: just a few extra hours of work or a slight rise in income can lead to an overpayment, which many do not even realise until months later, when they receive a demand to pay thousands of pounds. Under the Bill, such individuals would face expanded surveillance, automatic bank deductions and potentially public shaming, all without clear distinctions being made between honest mistakes and intentional fraud. This is not justice—this is cruelty wrapped in bureaucracy. The Bill proposes sweeping powers to access banking data, as many noble Lords have suggested. Let us be clear: these are bank spying powers that would allow the Department for Work and Pensions to trawl through the bank records of millions of people, not because they are suspected of a crime but because they receive support they are legally entitled to. At a briefing with the Minister, I raised that in this Bill there is no mention of things that all accountants know about, such as the garnishing of bank accounts, which already exist for the collection of debts. The powers constitute a fundamental assault on the right to privacy. They normalise mass surveillance of the poor, while doing nothing to address the significantly larger issue of tax fraud, which costs the Treasury nearly six times more than benefit fraud but receives a fraction of this attention. The noble Lord, Lord Sikka, referred to this. The problem is that the fine line between tax avoidance and tax evasion is sometimes a grey line. It is also how HMRC and its predecessor, Inland Revenue, tackle the problem when they find that someone has evaded tax. It is generally done by a financial penalty. I am reminded of the anecdotal story of the person told of the financial penalty for his unaffordable error who said, “Could I pay in cash?”. Where is the proportionality that the noble Lord, Lord Vaux, pointed out earlier in this debate? As the right reverend Prelate said, affordability assessments are needed. Furthermore, the Bill dangerously conflates fraud with error. According to the DWP’s statistics, fraud accounts for just 2.8% of benefits expenditure, yet the narrative pushed by this legislation implies widespread deceit among claimants. In truth, many overpayments arise from the bewildering complexity of the system or administrative mistakes by the DWP itself, mistakes which cost the public £800 million last year. Is it right that someone with a disability who disclosed all their financial details in good faith can be told months later that they owe thousands due to a departmental oversight? Is it right that a carer on the brink of burnout is treated as a criminal because of a minor miscalculation? One case shared by Turn2us was that of a woman in her 60s, housebound with several disabilities and complex mental health needs. After disclosing her private pension when applying for universal credit, she was told she had been overpaid and faced monthly deductions, even from her personal independence payment and non-means-tested benefit. Her crime was being honest in a broken system. Her punishment was perpetual financial stress and a complete loss of trust in the very institution meant to support her. I understand the purpose of the Bill, but it is focused on those who can least afford it, and very often, those who can afford it are still going to get away with cheating the system. The Bill does not fix that system; it weaponises it.

14:58:00

My Lords, I thank the Minister for her opening speech in outlining the purpose of and some of the details contained within the Bill, and for all the engagement from her and the noble Baroness, Lady Sherlock, who I think is in the running for a new job, closely followed by the noble Baroness, Lady Alexander. My noble friend Lady Spielman is hot on the heels. We greatly appreciate the engagement we have had, and it has been very helpful. I also pay tribute to my noble friend Lady Spielman on her maiden speech. It was excellent, and I know that others in the House will join me in welcoming her to these Benches. I hope that my noble friend has got the message loud and clear: we are pleased to see her. The words that describe her—substance and integrity—are absolutely accurate. I will be clear from the outset: this side of the House supports the principle of this Bill. Fraud against the state is unacceptable and tough measures that we can legislate for in this place to crack down on disreputable people and fraudsters who steal from the public purse are not just welcome but essential. We have a moral and fiscal duty to address this, and I echo the point raised so eloquently by the noble Baroness, Lady Alexander. The moral aspects of the Bill were also well referenced by the noble Lord, Lord Rook. The proposals before us were, broadly, introduced to Parliament by the previous Government. I was disappointed that, in the other place, the Minister refused to acknowledge our shared ambition on this Bill. Although we are on the same page as the Government when it comes to preventing fraud, we have some serious and genuine concerns, and many questions about how this objective can be achieved, given the Bill before us. One key question that these Benches have is on the level of ambition the Government have to combat fraud. Fraud is a very serious matter, which needs to be addressed robustly. We lose a total of £55 billion a year to fraud across the public sector, but the Bill before us is set to recover only £1.5 billion. This is 2.7%. Can the Minister tell us why the anticipated returns, as a target number, are so low? Perhaps His Majesty’s Government would like to go away, rethink the target and up their game. The Government seek to target three forms of welfare benefit through the provisions set out in the Bill. Can the Minister tell us how much each of these benefits contributes to the overall figure for public sector fraud? Can she also provide a breakdown of these figures, covering all welfare streams, to the House for our review and in preparation for Committee? Another question we have is why certain aspects of the Bill are not ready, notably the Cabinet Office proposals. We have seen this already with the Employment Rights Bill, to which literally hundreds of government amendments have been added to try to correct errors in the drafting of the legislation. I could not have put it better than the noble Lord, Lord Vaux: His Majesty’s Government need to get their act together on impact assessments. Do we really think that it is a good idea to lose his skills and that of other hereditaries, on such important legislation? I leave that with your Lordships. The Bill is being introduced without key impact assessments being available. We have no impact assessment measuring the cost to banks or to the DWP, the projected return on investment or the cost per head throughout the entire process. As we do not have these assessments, we will be discussing proposals with much of the relevant information unavailable. It would also be incredibly helpful for noble Lords to have a breakdown of the fraud figures that the Government referenced throughout the passage of this Bill in the other place. Knowing the details of the challenge we face will allow us to make a better assessment of where this Bill can be improved to better meet that challenge. I hope that the Minister can provide this information to the House soon. Having it to hand is vital in allowing us to do our jobs properly. It simply is not good enough that we should scrutinise these proposals without the information that we need to make an informed decision. I reiterate to the Minister that we want to work collaboratively with the Government to improve the Bill. I will start by covering the chapter of the Bill that relates to the Cabinet Office. The intention of the Bill to combat fraud in government departments is noble, and we have already had unanimous support from across the House. However, we are concerned that these proposals do not go far enough, for reasons that I shall now outline. The changes to the Public Sector Fraud Authority—like others, I will jump on the bandwagon and call it the PSFA—are a concern for us. This enforcement unit currently has 25 staff. The authority is rightly tasked with investigating fraud across every department—a massive undertaking. As the noble and learned Lord, Lord Garnier, raised, is the Minister confident that the PSFA’s resources are sufficient? I mentioned returns of 2.7% earlier; as my noble friend Lady Finn said, the returns specifically expected from the PSFA are far lower than that—around 0.002%. How much resource would the PSFA need to make returns of 25%? The Minister said that the Government will scale this operation, but we need to know how this will work if we are to approve the proposals now. My noble friend Lady Coffey made the point that the Bill does not go far enough. Her point about percentages and cash is real, and we need to address it. If the PSFA is to be expanded to meet the increased workload it will soon encounter, can the Minister tell us how this appointment process will work and who will oversee it? Can she please outline the timelines we can expect for when she anticipates the PSFA will be scaled up, and how quickly it will be fit for purpose, effective and achieving results? Furthermore, we have some serious questions over the independence of the PSFA. It is right that the Government are incorporating a provision in the Bill to make it an independent body. However, it is still subject to powers that go up to the Minister responsible in the Cabinet Office. Government departments are marking their own homework, and we have no actual guarantee that the PSFA will be independent. This should be in the Bill from the start and not down to the arbitrary discretion of the Minister. Can the Minister confirm that the PSFA would become independent from the Cabinet Office? It is unacceptable, in our view, that the process of recourse for those who want to appeal should be in a straight line back to the Minister. As my noble friend Lady Finn said, recourse processes should be independent, and we want to again emphasise that recourse should be through an independent tribunal mechanism and not back to a politically appointed person—someone, clearly, with vested interests. This all relates to a wider point about the ultimate purpose of the authority. The PSFA has an important task to perform, and we on this side of the House support the Government’s intention to introduce a six-year extension up to 12 years, but can the Minister give a timeline as to when it is expected to conclude its work? I wonder how the Government would react to a proposal of a sunset clause to the authority, so that there is no risk that these powers are held indefinitely beyond the period for which they are reasonably required. Points were raised on whistleblowing protections by the noble Baroness, Lady Kramer, and the noble Lord, Lord Palmer of Childs Hill. As my noble friend Lady Finn has already made clear, the Bill relates to situations where people could be asked to make very difficult, stressful and worrying decisions. It is easy for us to talk about this in academic terms but whistleblowing is far from easy, and we need to do all we can to support those who stick their necks out to do the right thing. The Government have made it clear that they believe that existing protections are enough, although a recent National Audit Office investigation into whistleblowing in the Civil Service highlighted serious shortcomings, showing that it is even harder than it has been to call out wrongdoing. The NHS has rightly strengthened its whistleblowing safeguards, and these issues are being addressed elsewhere in our state system. We on these Benches believe that the same support needs to be given to civil servants working in this sensitive area, covering both the Cabinet Office and DWP aspects. I turn to the part of the Bill which relates to the Department for Work and Pensions. We on these Benches also firmly support measures to crack down on those people who abuse the welfare system. For some people in our society to steal from a system that is designed to support the most vulnerable is a truly despicable act, and we need to stop those who do that as a matter of urgency. I have no desire to upset the noble Lord, Lord Davies, but I must say that the Minister the noble Baroness, Lady Anderson, mentioned driving licences; what about passports, too? The noble Baroness looks after child maintenance; I looked after it, under the guidance of my noble friend Lady Coffey, and we took away driving licences and we took away passports. How many do you think we took away? Less than five, because it was a deterrent. So, please, think twice before everybody knocks this. I want to make myself available to the Minister, because I have got a load of other ideas for deterrents, and I am telling you they will work. The Bill proposes a substantial increase to the DWP’s workload and, from what I understand of the detail that the Government have outlined, the DWP can expect to receive thousands on thousands of signals from banks flagging potentially fraudulent activity. These will then have to be individually checked by a human being. The Government have rightly said that they will approach this with a deep attention to vulnerability. We must welcome this. This was also raised by the right reverend Prelate the Bishop of Lichfield, but does this mean that DWP civil servants will be checking not only the movement of money into an account but also whether the person in question is someone with a disability—in other words, perhaps someone with reduced capacity or someone who is at risk of being coerced? None of this detail is clear, and the Government have failed to publish an impact assessment showing the cost of this additional work. It is vital that these wider considerations are taken into account. We need to distinguish between those who are committing fraud intentionally and those with reduced capacity and additional needs who may not realise that what they are doing is fraudulent. We also need to consider wider circumstances. If a suspected fraudster is in fact a woman trying to save money to escape an abusive relationship, we will be doing far more harm than good by stripping this money away. How can the Government ensure, under the provisions in the Bill, that vulnerable people will be supported and not debanked? If the Government in fact intend to proceed in the way that I have outlined, we are talking about literally thousands of hours of additional work. Can the Minister please tell us how the DWP intends to meet this increased workload, how much it will cost and whether she is certain that the additional cost of meeting this demand will be worth the revenue we save by tackling fraud in this way? We shall be paying close attention to this as we progress to Committee. I now want to say something about the use of artificial intelligence to improve investigatory performance—this was raised by the right reverend Prelate—and about technology, a point that was raised by other noble Lords. We would support the use of new techniques to improve efficiency, but they should be subject to close oversight. We are talking about personal, confidential financial information. Can the Minister assure the House that any use of AI will be subject to rigorous safeguards, and will she commit to coming before the House again to set out how these will work and how the Government will guarantee security to the owners of that data? Many of the same questions remain over the role of banks. The Bill places a significant burden on banks, which, it appears, are being asked to devote resources to this system out of a sense of moral duty, as, in dedicating staff and systems to the Government’s plans, they forego considerable opportunity costs which will not be recovered. This may be right in principle, but for financial institutions the bottom line is always the determinant factor. Can the Minister please update the House on how much these new responsibilities will cost banks? I know that the figure will ultimately depend on demand, but can the Minister tell us the cost per head, which the department will, I hope, know? Do the Government have an impact assessment prepared for banks, showing them how much this will cost them? If more work than anticipated emerges, what arrangements are made for paying for this? I am greatly concerned that these proposals are being put before the House while talks with banks are still ongoing. The Government have not come into this as prepared as I believe they should; we should know what the settlement is before we start discussing the Bill; and the fact that it is still a moving picture is deeply worrying when we are being asked to enshrine this in law. These are important questions, and I hope that the Minister can shed some light on them for the sake of business and, fundamentally, the taxpayer. We will be testing the Government in Committee on all these aspects. Arguably, the most fundamental provisions in this Bill relate to enforcement. People need to know that, if they commit fraud, they face a genuine and real risk of retribution. One of the issues that we have identified is that the DWP will be able to assess activity only in one bank account—this point has already been raised—which is the bank account that benefits are paid into. As soon as the Bill is passed, fraudsters will realise that all they need to do is open a new bank account and move the money over; then they are completely safe. Bank accounts can be set up in minutes from a smartphone, as highlighted by my noble friend Lady Coffey, so a fraudster could circumnavigate the DWP and all the measures in this Bill on their phone in the space of a single Tube journey. They would be completely safe in the knowledge that the DWP legally cannot pursue them any further. This brings me back to pilot schemes. Can the Minister please publish the results of these important schemes? I have a hunch that they might highlight some of these issues. Closing this loophole is the only way to make sure that the Bill works at all, which is another subject for debate in Committee. Finally, on a very serious matter that is a plague on society, I turn to so-called “sickfluencers”. These are people who use social media sites to spread information on how to defraud the benefits system. This sort of behaviour simply has to stop. People across the country are gaining substantial online followings. People consume their videos instructing them on how to defraud the benefit system. Sickfluencers provide model-aware answers, highlight keywords and openly boast that their script will win a claimant the maximum number of points in their welfare assessment. We need to be clear that this sort of behaviour is designed to circumnavigate the rightful checks that are in place and enable fraud. The Fraud Act 2006 and the Serious Crime Act 2007 provide a useful framework for tackling this, but we are concerned that those measures are not sufficient to police this sort of behaviour adequately. The Government have said that they want this Bill to modernise powers, and we believe that this is an area where modernisation needs to take place. We will therefore be paying close attention to this Bill in Committee and seeking cast-iron assurances from the Government. We simply want to ask what the Government will do to tackle this threat. How many sickfluencers have been detained under the current legal regime? Either the current legal framework is inadequate, or the powers are not being used. In conclusion, I reiterate our intention to work with the Government to ensure that this Bill is fit for purpose. I look forward to hearing the Minister’s answers to the points that I have raised. We believe that the issues that we have highlighted are fundamentally important to making this Bill a success, and we shall be pressing them in Committee if needed. I can see why the noble Baroness, Lady Fox, concluded that this Bill was not so dull after all. I thank all noble Lords who have contributed to the debate thus far. We genuinely look forward to engaging with Peers, the Minister and her team as the Bill progresses.

15:18:00

My Lords, I thank all noble Lords who have contributed to today’s thoughtful and decidedly not-at-all dull debate. Committee will be some fun indeed. It was a particular pleasure to hear the maiden speech of the noble Baroness, Lady Spielman, whom I welcome to the spreadsheet fan club. Frankly, I could have done with one of her spreadsheets to keep track of all the questions that I have been asked today. In the absence of that I am bound to miss some, for which I apologise in advance, but I will do my best. It is good to have her among our number, and I look forward to hearing more from her in future. Perhaps we should start briefly with the challenge that the Bill is designed to address. As my noble friend Lady Anderson made clear at the start, public fraud is simply not acceptable—as the noble and learned Lord, Lord Garnier, said, fraud is not acceptable generally, but public sector fraud is also not acceptable. Fraud does not become a victimless crime because it is directed at the state: it will cheat the public purse of money that could be spent on public services, which could help this Government deliver an NHS fit for the future or invest in our children to give them the best start in life. Listening to some of the examples given by my noble friends Lord Rook and Lady Alexander, it is so shocking that, during Covid, when people and charities were out there breaking their backs trying to serve people who were in desperate need, others were out there lining their pockets. It is a disgrace. It was very moving to hear from my noble friend Lady Alexander about what is happening when people are doing all that they have had to do in the British Council to pay that back when others do not want to pay back the money that they should be paying back to the state. That cannot be right. I also think that fraud in our social security system is damaging in a different way, whether it is undertaken by individuals or organised criminals. I think the noble Baroness, Lady Kramer, asked what the breakdown of that was. I can tell her that, in 2023-24, of the £7.3 billion lost in fraud in social security, 6% was taken by organised gangs and the rest was taken by individuals.

My Lords, is that the number of cases that were identified because there was enough evidence and people were arrested, or does she believe that that is an estimate of the total amount of organised fraud in the system?

It is a percentage of the amount of fraud that was recognised. Clearly, we do not have figures for the amount of fraud of any kind that has not been identified or recognised. That was the figure for the amount we have on our books as organised fraud. The reality is that, whether it is done by organised criminals or by individuals, this is not okay. It is not fair to taxpayers who fund social security, nor to the vast majority of people who claim only the benefits to which they are entitled. In my job, when money is as tight as it is now, I want every penny available for social security to go to the people who need it most. This Government are determined to tackle the issue head-on with a Bill that will provide the right tools to protect public money and fight modern fraud, coupled with the right safeguards. The Bill is tough on those who commit fraud against our public services or our welfare state. In doing so, it gives reassurance to taxpayers. One of the side effects is that it will be helpful to DWP claimants who make genuine mistakes, by helping to spot errors earlier so they can avoid getting into lots of debt. I thought the point made by the noble Baroness, Lady Spielman, about reciprocity was there. If people do not have confidence in our welfare state and the underpinning mutual shared obligations, that challenges our ability to maintain confidence and carry on supporting people in the future. We need to get this right, but we do not need to demonise people to do that. We just need to make it clear that people should get what they are entitled to, and, if they are not getting that, we should address it. We believe this Bill strikes the right balance, giving the Government new powers proportionate to the problem we are tackling while ensuring that those powers are wrapped around with effective safeguards and protections to give confidence to Parliament and the country. Having said that, and having listened to the debate, I recognise that it is just possible that not everybody agrees with us—or, at least, not yet. We have some way to go. I have every confidence that, once I have fully explained this, there will be unanimity across the House—or near-unanimity at least, being a realist. Having listened to the debate, it seems to me that there are a number of challenges. First, I offer a couple of truisms. There is no silver bullet to fraud. If there were one single thing to do, the previous Government would have tackled this, or some other Government would have done it. Tackling fraud is an accretion of a series of small decisions which, between them, add up to make a difference. Therefore, this Bill does what it does and does not do other things: it does not tackle bank robbers or tax evasion. It is a contribution, and I think it is an appropriate one. Secondly, we have to be a bit careful that the best is not the enemy of the good. What is in front of us is action that this Government will take that has not been done before, and I commend it to the House. The challenges that we have seem to come in three broad categories: we are not going far enough, we are going too far, or there are some challenges in the way that we are doing this. I will briefly look at each in turn. I start with the challenges that we are not going far enough, which have come from a number of noble Lords. The noble Baroness, Lady Stedman-Scott, and I have great respect for one another, but I say very gently that some of the critiques she has made of the Bill strike me as a little ironic, given that the last Government were in for 14 years and had all that time to take action. What did we get? We got one predecessor of one of these measures, which was put in at the fag end of the last Government and dropped into the other place after Committee, with none of the information that the noble Baroness is demanding from me—nothing at all, not even a requirement to produce a code of practice, never mind actually producing one, and absolutely none of the safeguards or protections. Now she is in opposition, I fully respect that it is the job of the Opposition to demand things of the Government, and she does a fine job of doing that. She also will not mind if, in turn, I occasionally throw back at her what her own Government failed to do. In this area, I think we are doing rather better. Having got that off my chest, let us move on. It is worth saying that this Government are actually doing something. We committed to the biggest-ever savings package on fraud, error and debt at the Autumn Budget. Along with the Spring Statement, DWP fraud and error measures are estimated to achieve £9.6 billion of savings by 2029-30, of which up to £1.5 billion will be generated by this Bill. So this Bill is not all that we are doing, but it is an important thing that we are doing. The noble Baroness, Lady Stedman-Scott, asked about cost. In the end, the costs of DWP working through these measures will be dependent on the munificence of the Treasury at the spending review, which I am not allowed to pre-empt. The impact assessment sets out our estimate and shows that around four times the benefit of every pound of our departmental spending will come back on scored measures to 2029-30. On not doing enough, the noble Baroness asked about “sickfluencers”. She is right—it is the view of this department that we have the powers to deal with these crimes at the moment. We think the Bill will help the PSFA to do that at the same time. But, if she has ideas about other ways in which that could happen, I look forward to hearing them, along with her many other ideas for tackling fraud, which I have no doubt Committee will give us every opportunity to discuss. While I am on the point, the noble Baronesses, Lady Kramer and Lady Stedman-Scott raised the question of whistleblowing. We absolutely agree; we want people to pass on information about fraudsters who are taking from our public services. We are open to keep looking at the best way to do that. We are working with partners such as Action Fraud to make it simple and easy for the public. In the case of DWP, benefit fraud can be reported by the public online, by phone or by post—and, trust me, it is. But also, DWP staff have clear channels to report. On top of that, the PSFA will look into the possibility of being listed by the Department for Business and Trade as a body with which individuals can raise concerns around public sector fraud. That will help on that side. While we are on the PSFA, concerns were raised by the noble Baroness, Lady Finn, the noble and learned Lord, Lord Garnier, and others about whether it is doing enough and about the scale. The PSFA’s enforcement unit is relatively new in what it does. The noble Baroness, Lady Finn, was a little a little bit harsh on test and learn. When the enforcement unit is as new as it is and will only with the passage of the Bill get the powers it needs to do any of these things, surely testing and learning is the right thing to do. If it can demonstrate clearly that results come from that, the possibility for scaling will be significant. I promise I am not making any assumptions of the Treasury. The noble and learned Lord, Lord Garnier, asked whether the Government audit the work of the PSFA and whether the powers in the Bill will add anything. The PSFA publishes annual reports and has benefits audited by the Government Internal Audit Agency. Examples were given in my noble friend’s opening speech of where the PSFA currently cannot make the desired progress because it has not got the powers it needs. The Bill will give them to it. That is, briefly, the case for not going far enough. Let us now do the going too far case. A number of noble Lords, including the noble Baroness, Lady Fox, to a degree, the noble and learned Lord, Lord Garnier, my noble friends Lord Davies and Lord Sikka, and the noble Lord, Lord Vaux, are concerned about possible infringements on the right to privacy or other aspects of the reach of the Bill. I am grateful to the noble Lord, Lord Vaux, for acknowledging the improvements made by the Bill. I raised a number of reservations when the last Government introduced their third-party data measure, because I felt that the powers were simply not proportionate and that there were not enough safeguards around them. While I am here, I say to my noble friend Lord Davies that the fact that that we provide safeguards does not mean the powers are wrong. That is what safeguards are for. There are safeguards in all aspects of life. I will come back to that. It means that we want to be transparent and show people that powers the state is taking are used appropriately. That is what they are for. The noble Lord explained the limitations. We are now limiting the benefits in scope. For all the measures there will be clear limits about what information can be requested, for what purpose, and how the PSFA and DWP will use it. That is all new, and the Bill introduces considerable oversight and reporting requirements. I believe the Bill strikes the right balance and, in answer to my noble friend Lord Sikka, I am confident that it is complying with the Government’s duties under the ECHR. The Government’s detailed analysis on compatibility is set out in the published ECHR memorandum. I need to take on a couple of noble Lords who have suggested that this is a sort of broad trawling expedition. It has been described as DWP going out there and trying to have access to everybody’s bank accounts—suspicion-snooping. That is a simple misunderstanding of the nature of the powers. Let me try to explain why. DWP will not be given access to people’s bank accounts by this measure, which is about banks being asked to examine their own data, which they already have and can already look at. They have been asked to provide DWP with the minimum amount of information necessary to highlight whether there is a possibility that someone may not be meeting a specific eligibility rule for a specific benefit. At the point the information is shared with DWP, no one is suspected of having done anything wrong. The presumption of innocence is still there.

It is clear that the DWP does not want to see that data, but it will be telling the banks to trawl for the data. The Minister says that they already have the data, and that they would not be trawling for a government-mandated outcome before the DWP told them to do it. As the Minister was about to say, and I have stressed this before, it is true that there is no suspicion of anyone. The only reason the bank would be doing it is that a person is in receipt of a particular benefit. The bank therefore has to check whether the person is in receipt of that benefit—because it does not necessarily know that—by going through its databases on the eligibility criteria the Government are going to give it. So no one is saying that the Government are spying, but the banks are being asked to “spy”—it is a phrase, just a slogan. We understand the point; we just do not think you are satisfying us.

I have heard accounts of people saying that disabled people will worry that DWP will know that they go to Pret and therefore cannot really need the money, et cetera, so it is important to make it clear that DWP will not have access to their bank accounts through this EVM. DWP knows the bank accounts into which benefits are paid, so DWP will tell the banks to look specifically at the bank accounts into which those benefits are paid. It will tell them specifically the criteria they are looking for, and all they are being asked to provide is enough information to identify accounts which may, on the face of it, be in breach. Then, that information will be used along with other information that DWP holds, and it will be examined by—to reassure the right reverend Prelate the Bishop of Lichfield—a human being, who will make a decision on whether to investigate. There could be a number of outcomes. The outcome could be that the person may have had, for example, more money in their account than the benefit allows, but for one of the many acceptable reasons. There could be a perfectly good reason. The person may have made a genuine error, and that will be dealt with in a different way, or in some cases there may be evidence of fraud, and that might move into a fraud investigation. I accept that some noble Lords may not think this proportionate. We believe it is proportionate, with those safeguards wrapped around it, but I want to be clear that we are arguing about the same thing, not about different understandings of what is going on at the time.

My noble friend referred to an acceptable reason. Who ultimately decides what constitutes acceptability?

This may be a matter that we might more usefully explore in Committee, but I shall give my noble friend a simple example. There are certain compensation payments that are not taken into account in terms of eligibility for benefits. They are excluded from the capital limits. So it may be that somebody has received a compensation payment. There is guidance about circumstances in which people may have money in their account. The point is that cases will be looked at individually before they are pursued. There is a requirement on fraud investigators to look at all information and chase down all avenues of information, so they will do that and make an appropriate decision. Just to be clear, on benefits in scope, the initial use of the power is focused on three benefits: universal credit, employment support allowance and pension credit. The reason why is that that is where the highest levels of fraud are at the moment. The noble Lord, Lord Palmer, will have noticed that carer’s allowance is not on the list for the EVM. The two types of fraud and error we are targeting initially—breaches of capital and the living abroad rules—are significant drivers of fraud and error in those benefits. For universal credit, nearly £1 billion was overpaid last year as a result of capital-related fraud. Once fully rolled out, that measure alone will save £500 million a year. The state pension is expressly out of scope and cannot be added even by regulations, and that is sensible given that the rate of state pension overpayment is just 0.1%. Somebody asked me whether we plan to add any other benefits. The answer is no. We cannot rule them out because fraud may change in the future and different benefits may be subject to different levels of fraud. A number of noble Lords, including the noble Lord, Lord Vaux, the right reverend Prelate the Bishop of Lichfield and the noble Baroness, Lady Stedman-Scott, raised the use of AI and automated decision-making. To be clear, we are not introducing any new use of automated-decision making in the Bill, so no such new use will happen as a result of it. The DWP and the PSFA will always look at all available information before making key decisions about the next steps in fraud investigations or inquiries into error. Fraud and error decisions that affect benefit entitlement will be taken by a DWP colleague, and any signals of potential fraud or error will be looked at comprehensively. Given the arguments made by those who think we are not going far enough, and by those who think we are going too far, we appear to be Goldilocks in this. I think we have got the balance right now. Goldilocks is not always right, I accept that, but I think we have landed in the right place because of the safeguards the Bill includes to ensure that its measures are effective and proportionate. Those safeguards provide protection but also accountability and transparency. I will not go back over all the different kinds of oversight, but on the appointment process, I assure the House that the process for the independent people who will oversee EVM and the PSFA’s measures will be carried out under the guidance of the Commissioner for Public Appointments and will abide by the Governance Code on Public Appointments throughout. I am grateful for my noble friend Lady Alexander’s compliments. I would suggest that she herself apply, but she might not qualify for the independence threshold entirely, as one might hope. I shall say a brief word on safeguards. The Bill includes new rights of review and appeal. The DWP will still provide routes for mandatory reconsideration of decisions relating to overpayment investigations, followed by the opportunity to appeal to the First-tier Tribunal. For direct deduction orders, again, there are new routes for representation and review, followed by appeal to the First-tier Tribunal, while the court’s decision in relation to a disqualification order can be appealed on a point of law. On driving licences, I take the point made by my noble friend Lord Sikka: why driving licences and not membership of a political party? I hate to break it him, but it is just possible that not being allowed to join a political party does not have the same deterrent effect as losing a driving licence—not for us, obviously, but we are not typical, although it is touch and go. I assure the House that this measure has been used for a long time in the Child Maintenance Service. As the noble Baroness, Lady Stedman-Scott, said, its effectiveness is shown in that it almost never needs to be used. As a final reminder, this is about debt recovery. It is about people who, by definition, are not on benefits and not in paid employment. The reality is that if you owe DWP money and you are on benefits, the DWP can already deduct it from your benefits, and if you get a wage packet the DWP can deduct it from your wages. However, if you are none of those things—if you are privately wealthy, self-employed or paid through a company—and you owe the DWP money, the department does not have the same ability to go after that money as it does for those who are on benefits or in PAYE. The Bill gives the department the opportunity to use measures such as deduction orders and other tools to try to bring people to the table. If someone comes to the table to have a conversation, we will begin to arrange a payment plan. The other measures are there only if people refuse to engage and simply will not come along and do what they ought to do.

Since my noble friend mentioned me, I think I am honour-bound to ask her a couple of questions. Will she confirm that foreign bank accounts will not be covered by any of the measures in the Bill?

I think we should come back to the detail of how bank accounts are dealt with in Committee. I am meant to stop at 20 minutes and the clock is saying 19 minutes and 38 seconds.

Keep going!

I will keep going for a bit. A number of noble Lords asked whether the banks want to engage. We have been engaging very much with the banks. Meetings have been held by the DWP and Cabinet Office Ministers, some of which I have attended, with senior representatives of the finance industry, including UK Finance, individual banks, building societies and the FCA, and we continue to work closely with banks on the design and implementation of the relevant measures. We have set out the expected cost to banks where possible, and an impact assessment of the business costs of the EVM will follow, but that will depend on how the measure is designed and the way in which it will work. On potential conflict with financial crime duties—this is important—the Government are working closely with UK Finance and the FCA to make sure the measures align appropriately with wider financial crime duties. That includes work on the development of the PSFA’s guidance and the DWP’s codes of practice for debt recovery and the EVM. We will make sure that works appropriately. I think I am running out of time, but I will just say a word on carers. I absolutely agree with the noble Lords, Lord Vaux and Lord Palmer, and the noble Baroness, Lady Kramer, who mentioned the important contributions of carers. This Government are absolutely behind carers. We introduced the largest ever increase to the earnings limit in carer’s allowance. Crucially, this Government introduced a review. We commissioned Liz Sayce to lead an independent review into earnings-related overpayments of carer’s allowance. The review is expected to reach its conclusions this summer and we are looking forward to learning from that to make sure that any learning can be fed back into the way the department works. Finally, I will say a word on safeguarding. I am sorry to say I have forgotten which noble Lord mentioned that the DWP Select Committee put a report out on this subject. We will look at it very carefully and, obviously, take close account of its recommendations. Long before that happened, we put out our Green Paper, Pathways to Work. The Secretary of State is very keen to make sure the DWP gets safeguarding right. We committed in that Green Paper to introducing a new department-wide safeguarding approach. It will be a very significant departure from the way things are done. We are going to work with stakeholders and consult to make sure we get that right. To reassure noble Lords, the DWP looks carefully all the time at how we support vulnerable people. Decisions are taken individually and that is taken into account. Of course mistakes will be made on occasions, but as a department we place a huge store on making sure we understand the circumstances people are in and support then when they need help, and try to find the best way through for each individual.

I am annoying the Whip. Does my noble friend have a response to the point I raised on behalf of my noble friend Lady Lister about the position of people who reasonably assume that the money received in error was rightfully theirs?

I have a wodge of answers to questions asked by a lot of noble Lords, and I am afraid time has run out. But to be clear, we need to not ally fraud and error. This is just a data pull. If data comes from the banks to the DWP, it will be used with other data to make an individual assessment of someone’s position and appropriate decisions will be made at that point about how to deal with it. It may be an overpayment, a genuine mistake, an act of fraud, or there may be no problem. Cases will be looked at individually. This Bill delivers on our manifesto commitment. It is expected to save £1.5 billion over the next five years as part of wider action at the DWP to save a total of £9.6 billion. The Bill will bring in new powers for the PSFA to tackle fraud and it will deliver the biggest upgrade to the DWP’s counterfraud powers in over 14 years. We believe it is proportionate and demonstrates that we will take action against those who willingly defraud our public services, providing the right tools so that we can step up to prevent, detect and deter criminal activity. I very much look forward to working with so many noble Lords across the House—it says here—during the passage of this important Bill. I look forward to seeing many of them in Committee. I beg to move.

Bill read a second time and committed to a Grand Committee.