Public Authorities (Fraud, Error and Recovery) Bill

Committee (1st Day)

16:15:00

Amendment 1

Moved by

1: Before Clause 1, insert the following new Clause— “PurposeThe purpose of this Act is to enable public authorities to identify and prevent fraud and error and recover monies lost through fraud or error, and to strengthen mechanisms for reducing fraudulent activity across public services.” Member’s explanatory statement This amendment sets out the purpose of the Bill—to identify, prevent and recover public funds lost through fraud and error, and to strengthen mechanisms used to reduce fraud across public services.

My Lords, this is a serious Bill. It deals with a serious problem. Fraud against the taxpayer is not a footnote. It is not a rounding error. It is a threat to public trust and the integrity of government. We on these Benches support the purpose behind the Bill. We want it to succeed. We want it to be strong, clear and capable of making a difference from the moment it takes effect. In the days ahead, we will approach Committee with purpose. We will work with the Government where we can; we will press them where we must. Our proposals will be focused, practical and aimed at making the Bill stronger. At Second Reading, we raised a number of issues. These remain our priorities. We want proper oversight of the powers granted to the Public Sector Fraud Authority. We want strong review mechanisms. We want protection for those who may be exposed or vulnerable and we want recognition of the cost burden placed on those who are asked to deliver these powers. These concerns are not confined to one party or one corner of the House; they are widely shared. They reflect a simple truth: good intentions are not good enough. If we are to defeat fraud, we need sharp tools, clear lines of responsibility and laws that do not fold under pressure. That is the task before us and the spirit in which we will proceed. We will be starting our Committee stage discussion by covering some of the proposals put forward in relation to the Cabinet Office. We broadly support the intention of these measures, but we have several key concerns and suggestions around the Bill as it stands. First, the role of the Public Sector Fraud Authority remains ill defined, particularly in relation to other public authorities. At present, the PSFA can only act when invited by the very bodies it is supposed to scrutinise. This is not effective oversight; it is an invitation to avoidance. Departments can simply choose not to refer themselves. More importantly, if they lack the legal powers to investigate fraud internally, these powers should be given to them directly. If they already possess them but fail to act, a central authority merely serves as a convenient place to offload difficult or politically awkward cases. Yet the Bill does not address this gap. It does not strengthen departments or build capacity at source. Instead, it hands sweeping new powers to the Cabinet Office and places responsibility for tackling fraud across the entire public sector in the hands of a team of now just 25 civil servants. That is not a credible model. It concentrates accountability at the centre without providing the means to exercise it effectively and it leaves the rest of the system with little incentive to act. PSFA officials are handed sweeping PACE powers with no direct authorisation or legal requirement to pass a reasonableness test and can refuse to undertake an investigation with no duty to report the reasons why. The risk is obvious. Complex fraud will be passed from hand to hand, referred and re-referred, until it disappears altogether into the undergrowth of government. Secondly, the Bill grants the Public Sector Fraud Authority powers of remarkable breadth. These include the ability to obtain information notices, issue civil penalties, apply for search warrants under the Police and Criminal Evidence Act 1984 and extract funds directly from bank accounts by order. These are not judicial decisions; they are executive powers exercised administratively. Critically, the Bill allows these functions to be exercised not by Ministers but by civil servants, as junior as high executive officer grade, acting as authorised officers under Clause 66. There is no requirement for ministerial sign-off and, in many cases, no real mechanism for contemporaneous parliamentary scrutiny. The only oversight comes in the form of an independent reviewer appointed by, and reporting to, the same Minister whose powers they are reviewing. That reviewer cannot intervene, stop action or compel disclosure. They merely write a report after the fact, which the Minister is then required to publish. That is not accountability; that is delegation without control, power without visibility and scrutiny without consequence. A system that concentrates coercive legal powers in the hands of junior officials outside of clear ministerial direction not only is constitutionally careless but risks creating a grey zone of enforcement where power is exercised without responsibility and mistakes cannot be traced back to those elected to answer for them. Ensuring that we find the right balance, where we develop the PSFA into an authority that has proportionate powers, a credible anti-fraud function and proper oversight, is the objective of our amendments today. Our first amendment, the purpose clause, is intended to ensure that the use of sweeping powers in the Bill is limited only to the purpose of identifying and preventing fraud and the recovery of public funds lost through fraud and error, as well as to strengthen mechanisms to prevent this in the future. We believe that it is a sensible, proportionate amendment that will ensure that the powers in the Bill are used only in pursuit of that explicit objective. A legal protection against the abuse of powers is a responsible safeguard and, given the extent of some of the powers granted in the Bill, anchoring that to the core purpose on which noble Lords across the House agree is, in our view, a reasonable measure. Our role as the Opposition, as I said, is to question the Government, to challenge them on their reasons and their rationale and to make suggestions on how to improve legislation. I look forward to this Committee day, and those upcoming, to play that role. I beg to move.

My Lords, there is really not a lot to say at this stage. We support the purposes of the Bill. Obviously, it is not meant to be a contentious Bill, but the interesting thing is the fine line that it draws between chasing people who have made honest mistakes and those who enter into fraud. As with income tax—if we still use the old words from my accountancy days—the difference between evasion and avoidance is sometimes a very thin line. We will explore where you draw that line in terms of how you chase people for mistakes that have been made, perhaps on purpose or perhaps in error. We look forward to the progress of the Bill to see where those lines are drawn.

My Lords, I shall speak briefly as the other opposition Front-Bencher working on the Bill. I shall make a few introductory remarks on the purpose of the Bill as we begin Committee. I join my noble friend Lady Finn in welcoming this opportunity to have a productive, collaborative opening discussion on what the Bill is actually about and what it should be about. Public sector fraud, as we have debated, is a crime that hurts every taxpayer in the country. It hurts every public service user and is an insult to everyone who works hard, pays their taxes and contributes to our society. This is a problem that we need to take steps to address, and the Government are right to reintroduce legislation and restart the process, which I know both Ministers acknowledge was started under the previous Government. As noble Lords will be aware, my main focus will be on the second part of the Bill, which covers the DWP. This will not be covered so much in the amendments under discussion today, although I want to take the opportunity at the outset to flag up in advance and highlight some of the concerns that I have around these provisions and where my focus will be in the forthcoming Committee days. I hope this is helpful to the Committee. First, on banks, there are still many questions over how the relationship between the DWP and the banks will manifest itself. We do not have clarity from the Government over how the process will work in practical terms or the costs that will be incurred by the DWP and financial institutions as a result of compliance under the terms of the Bill. As we highlighted at Second Reading, the Government, if they remain committed to human oversight of all decisions and reviews of information obtained from banks, could see a massive increase in their workload. Gaining greater clarity on this relationship, how it will work, the impact that it is anticipated to have and the resources required will form part of our approach on this part of the Bill. Linked to this is the need to test the means to the end. What will be the cost for the expected return? How will the return be defined? That is the identity and recovery of fraud; also, the measurement of the deterrent factor in taking greater and more stringent measures to combat fraud—to take the challenge to the fraudsters, who have been seen to become ever more sophisticated. We will wish to challenge enforcement. What works? What are the sanctions for those who are convicted? Are they effective? What costs and resources are judged to be estimated in respect of this aspect of the Bill? Secondly, we want to ensure that the Bill protects vulnerable people and recognises additional factors that may lie behind, for example, an overpayment. Proportionality in the exercise of these powers is vital, and we need to ensure that we do not cause greater harm than good in the pursuit of our shared objective. This concern is shared by noble Lords in this Committee. I am hopeful that we can reach an understanding with amendments that protect vulnerable people. Finally, we see the Bill as an opportunity to combat those who seek to share information, allowing people to defraud the benefits and welfare system—the so-called “sickfluencers”. This is a serious problem. Thousands of people every day are consuming content that informs them of how to play examiners and score certain points based not on their actual health condition but on a script they have been taught online. These assessments are the mechanism through which the state determines eligibility for welfare payments. “Sickfluencers” who actively encourage dishonesty and make money out of a dishonest gaming system for exploitation must be stopped. We shall support amendments that seek to make this an explicit offence, so that there can be no room for doubt that these actions are wrong and could be criminal. This is an important discussion on a topic that deeply affects everyone in our country. I welcome the opportunity to discuss ideas and suggestions for improvements to the Bill, which attempts to achieve a noble task. I and my noble friend Lady Finn will work in good faith with the Government and noble Lords across the Committee to improve the Bill and to make it effective and responsible.

My Lords, and so we begin. I thank all noble Lords present for their participation and engagement. On a personal note, before we get to the substance and serious detail of the Bill, this time last week I was having my make-up done for getting married, so I welcome noble Lords joining me on my honeymoon in our Palace. Moving on to the substance, I remind your Lordships why we are here today. Fraud against the public sector takes money away from vital public services, enriches those who seek to attack the Government and damages the integrity of the state. This Government said clearly in our manifesto that we will not tolerate fraud or waste anywhere and that we will safeguard taxpayers’ money. This Bill is part of those efforts. This is a Government focused on delivery. The Bill makes provisions “about the prevention of fraud against public authorities and the making of erroneous payments by public authorities; about the recovery of money paid by public authorities as a result of fraud or error; and for connected purposes”. This is already in the Bill’s title. There is no need for an additional new clause at the start of the Bill to set out a purpose that reiterates this, albeit in different language. It is important for your Lordships to understand the real impact of fraud against the public sector. This is a dry term for something profoundly impactful. It is not government or state that is the ultimate victim of such fraud. It is not the Chancellor’s pocket that is picked, although the Treasury bears the brunt of at least £55 billion of fraud and error each year. The real victim is the British people. Every taxpayer who pays their fair share pays a fraud premium, because fraudsters cheat the system and skim from the top. It is taxpayers who are the victims. Every citizen who uses public services, knows how much good every penny can be put to in the communities in which we all live and rightly expects that the money will go to support their community is being defrauded. It is our citizens who are the victims. Everyone who is in need, and who relies on the benefits and welfare systems that others cynically abuse, is a victim of public sector fraud. Noble Lords across your Lordships’ Committee will share my contempt for fraudsters who attack the British people in this way, and will want to take decisive action to start putting things right.

16:30:00

Part 1 of the Bill takes the first steps in building a new framework for cross-public sector fraud enforcement, authorising powers that will be used by the Public Sector Fraud Authority as part of the Cabinet Office. This is a new approach and it will be tested cautiously to ensure that the powers and penalties it creates work as intended. It provides extensive safeguards to ensure that the public are protected.

Part 2 of the Bill will modernise, extend and strengthen the DWP’s existing counterfraud powers, bringing it into line with other bodies such as HMRC. It will introduce new powers that will improve the DWP’s access to important data, which can be used to find and prevent fraud and error more quickly and effectively; and, crucially, it will improve the DWP’s ability to recover money for taxpayers.

With strong safeguards in Part 2, it strikes the right balance between having effective powers and the necessity for proportionality and fairness, which is something that we try to do throughout the Bill. This part is tough on those defrauding public services or stealing from our welfare system, and it is fair to both taxpayers, whose money it protects, and the DWP’s claimants, who may have made genuine mistakes, by helping spot and stop errors earlier to avoid claimants getting into debt.

Many of the specific issues raised by the noble Baroness, Lady Finn, the noble Lord, Lord Palmer, and the noble Viscount, Lord Younger, will be touched on in more detail as I continue to respond in Committee. I hope I have made the case clear not only for the Bill but for why it is unnecessary to add a purpose clause. To that end, I ask the noble Baroness, Lady Finn, to withdraw her amendment.

My Lords, our first amendment —to insert a purpose clause—has a clear and simple aim. The Bill grants sweeping powers, many of which can be altered and wielded through secondary legislation. Our purpose clause would ensure that any Administration exercising powers under the Bill will be tied to the core purpose that we have defined: to identify and prevent fraud, to recover public funds lost through fraud and error, and to strengthen mechanisms used to reduce fraud across public services. As we begin Committee, we do so with a clear and constructive purpose. We support the principle of the Bill and share the goal of tackling fraud against the public purse. But as I said at Second Reading, support for the goal must not mean silence about the means. Our focus now must be on ensuring that the legislation is as effective, proportionate and accountable as it needs to be. Through our amendments and contributions, we aim to improve the Bill—strengthening its safeguards, clarifying its powers and ensuring proper oversight. In doing so, we hope to help shape a framework that is both robust in its fight against fraud and respectful of the principles of fairness and transparency. We look forward to working with the Government and colleagues across the Committee to achieve that outcome. I beg leave to withdraw the amendment.

Amendment 1 withdrawn.

My Lords, I am now going right off script, for which I am sure I will get into terrible trouble, to say to the noble Baroness, Lady Anderson, what a way to spend a honeymoon—but many congratulations. Clause 1: Core functions of the Minister for the Cabinet Office Amendment 2

Moved by

2: Clause 1, page 1, line 12, after “preventing” insert “, investigating” Member’s explanatory statement This amendment probes the Government’s plans for the extent of the role of the Public Sector Fraud Authority in supporting other public authorities in tackling fraud against them.

My Lords, I apologise for not congratulating the Minister for choosing to spend her honeymoon in these august surroundings. What better way? At Second Reading, I highlighted the cultural problem with tackling fraud—that it is often safer to overlook than to uncover—so we have to change the culture and ensure that proper tackling of fraud is a cultural practice embedded within every public authority and government department. There is merit in creating a body with the powers to investigate fraud externally, but we need to make sure that proactive prevention and investigation into fraud start at home. Our Amendment 2 seeks to create an obligation for the Minister for the Cabinet Office to support public authorities in undertaking their own investigations into fraud when it occurs in said public authorities. In further developing the PSFA, the Bill provides us with a new resource and opportunity to support departments to intervene early and create mechanisms through which they can tackle this issue internally. This objective has several key advantages. One major advantage is that this approach recognises that public bodies are complex, with unique funding mechanisms and operational procedures. Internal fraud teams bring intimate knowledge of these environments and have greater capacity to pursue targeted objectives, using knowledge that external agencies may lack. This allows for swifter detection of anomalies, targeted interventions and smarter use of data and insight. Another significant advantage is that conducting internal fraud investigations inspires deterrence. Internal investigations can often begin before fraud escalates or becomes systemic. Timely action minimises losses and creates a departmental culture that stands more firmly against fraud. Not waiting for an external body to point out what has already gone wrong can embed a culture of deterrence and proactive interdepartmental counterfraud measures, which are an opportunity to minimise losses and therefore departmental damage. Of course, internal investigation must never mean internal cover-up. The answer is not to sideline external oversight but to complement it. We must ensure that departments are equipped with the right skills, resources and authority to carry out investigations properly and that they are held to account when they fall short. Our Amendment 24 seeks to strike this balance by requiring public authorities to conduct an internal review if they lose £50,000 or more through an overpayment or fraud, and to provide that report to the Minister for the Cabinet Office. This measure seeks to meet the benefits that I have just outlined, while embedding in law that responsibility for fraud cannot be outsourced. Authorities that lose money must take account of why this has happened and, fundamentally, they must also take responsibility for it. Making them accountable to the Minister is a mechanism through which we can achieve this. I hope that the Government will consider supporting the amendments in this group, which seek to embed departmental accountability for fraud while utilising the resources of the PSFA to create intradepartmental cultures that deter and counteract fraud. I beg to move.

My Lords, if we continue at this speed, the Chief Whip will be disappointed that we are doing only seven groups. It is probably unlikely that we will continue at this speed, but I can aspire. While I appreciate the comments from the noble Baroness, Lady Finn, I want to be clear that Amendment 2 is unnecessary as it is duplicative. It would insert “investigating”, as a way that the Minister can support other public authorities’ actions in response to fraud, separately from the explicit function of investigating if a request is made of the Minister by the public authority, which is earlier in the same clause. It is unnecessary because the word “tackling” in the same line of the clause cited covers any activity to support a public authority dealing with fraud and supporting them in their own investigations too. It is deliberately drawn broadly so, if adopted, this amendment would not change the scope of Part 1. The Government’s intention with Part 1 is for the PSFA to become one of the ways that public authorities deal with fraud, by requesting that it take on a case for investigation, enforcement or recovery. The PSFA is also happy to support other public authorities in their own fraud investigations, and already does so. Which option is best will depend on the facts of the case. Amendment 24 would require departments to conduct an internal review if, following a PSFA investigation, it is confirmed that they have lost more than £50,000 to overpayment or fraud. All losses at this scale should already be investigated and reported on. There are established audit, assurance and reporting processes for this. In addition, the facts of the case would already have been established by the PSFA, and learnings taken from it will be shared on a cross-government basis to aid the prevention of fraud—hence the establishment of the PSFA within the Cabinet Office. This amendment would create an extra burden on each department and replicate the work of the PSFA, and is unnecessary as its core aim will already be addressed through other activities. I hope that this explanation reassures the noble Baroness, Lady Finn, and that she can therefore withdraw her amendment. I expect that we will discuss more of this in great detail as we continue.

My Lords, I thank the Minister for her response. As we draw the debate on this group to a close, I thank all noble Lords who have engaged with the issues—so I thank the Minister. We are clear in our recognition that tackling fraud must go beyond enforcement. It must be a culture embedded across every public authority and government department. Although it is right that the Public Sector Fraud Authority must have the powers and resources it needs to act decisively, with these amendments we highlight that fraud prevention cannot and must not rely on external investigation alone. The work must begin within departments themselves. Amendment 2 reflects our view that the Minister for the Cabinet Office should have a duty to support public authorities in carrying out their own investigations, and the amendment seeks to use the resources of the PSFA to encourage early intervention, the development of internal counterfraud capability, and ensuring that every public body has the tools to act on fraud swiftly and effectively to counter fraud at home. Our Amendment 24, which would require internal reviews for significant losses, is a proportionate and reasonable step towards building a culture of accountability across the public sector. If a public authority loses £50,000 or more through fraud or overpayment, it is right that the public body must work to understand what went wrong, and it is right that it must explain this to the Minister. Without our amendment, we risk allowing the same mistakes to recur, with no mechanism for learning or redress within the public body itself. Our amendments seek to promote a culture of responsibility. They seek to ensure that no department or authority sees fraud as someone else’s problem or as a matter that will simply be dealt with elsewhere. The message that these amendments send is clear: tackling fraud must begin at home. These proposals are balanced, targeted and grounded in practical experience. I hope the Government will reflect carefully on these points and consider working with us to embed this into the Bill. I beg to withdraw the amendment.

Amendment 2 withdrawn.

Amendment 3

Moved by

3: Clause 1, page 1, line 13, at end insert— “(e) creating a whistleblowing reporting channel for cases of fraud against public authorities which—(i) guarantees confidentiality and anonymity if requested,(ii) includes clear definitions of who is a whistleblower in cases of fraud against public authorities,(iii) provides a process to update whistleblowers in cases of fraud against public authorities, and(iv) protects whistleblowers in cases of fraud against public authorities from retaliation and detriment.”

My Lords, I congratulate the noble Baroness, Lady Anderson. In the eyes of this Committee, coming here today on her honeymoon to lead on the Bill demonstrates that she is a true romantic. The amendments in this group, both of which are in my name, are probing amendments, and they are designed to create a whistleblowing channel in the PSFA. Amendment 3 is more general, but Amendment 66 would specifically set up an office of the whistleblower. Expanding the role of the Public Sector Fraud Authority without creating an appropriate whistleblowing channel seems an opportunity seriously missed. The Cabinet Office, with its wide reach, is exactly the right place to put an office of the whistleblower to tackle public sector fraud. At Second Reading I spoke of the change in attitude towards whistleblowers by both regulators and enforcement agencies. Many now see whistleblowers as crucial to their effectiveness. I will not repeat a Second Reading speech; I ask the Minister not to take my word for this but to speak directly to the Serious Fraud Office, to HMRC’s tax office and to the Covid commissioner. I hope the Government will respect what these organisations have learned out in the field about tackling fraud, and that will lead her to see the significance of creating an appropriate whistleblowing channel. However, I want to address what seemed to be some misapprehensions from the Minister’s speech at Second Reading. She seemed to be of the view that the national benefit fraud hotline is a sufficient whistleblowing channel. As far as I can tell, it funnels information, usually anonymous, to DWP, but there is little or no follow-up with the individual who has reported. Whistleblowing is a process. Initial reports lead to further exchanges and often to the gathering of information and evidence. That is why it is so valuable. The hotline today simply is not sufficient, and that is one of the reasons why fraud is so prevalent. The Minister also said that only 6% of benefit fraud is linked to organised crime, and I find that impossible to believe. The Police Foundation recently did a major piece of research and concluded that 30% to 45% of fraud is linked to organised crime. That is way above the levels previously estimated anywhere across the piece before that report came out. It is now regarded, in a sense, as the masterpiece of research in this area.

16:45:00

Benefit fraud is just as attractive to criminals as any other kind of fraud. Without insider knowledge, which comes from whistleblowing, the SFO has little hope of identifying most of the organised bad actors, and none of the new powers in the Bill seriously addresses that. The Minister also spoke of the PSFA possibly being listed by the Department for Business and Trade as a prescribed body where individuals can raise concerns around public sector fraud with confidence. The problem is that the Public Interest Disclosure Act, which provides for the prescribed person scheme, protects only whistleblowers who are workers. It sits in employment law. This is a fundamental problem with PIDA and whistleblowing way beyond this Bill, but it demonstrates that for the Minister to achieve what she apparently wants, which is a safe channel, she is going to have to come up with some very different answers.

To illustrate the point I will quote from PIDA, because it makes the problem clear, although I will abbreviate:

“a ‘protected disclosure’ means a qualifying disclosure … which is made by a worker in accordance with”,

and then it cites some sections. It then goes on to say:

“a ‘qualifying disclosure’ means any disclosure of information which, in the reasonable belief of the worker making the disclosure, tends to show”,

and then it gives a list of examples. I think many people do not recognise how completely the existing whistleblowing framework is embedded into and framed by employment law. It applies not even to workers in general but to a fairly narrow body of workers, and therefore to think it can be applied elsewhere simply does not work. A separate channel is going to have to be created, or else PIDA will have to be completely ripped up and reformed, but we have this Bill in front of us. My plea to the Minister is: in creating a new body focused on fraud, please will she think again about making sure that it has the tools it needs to be fully effective? It is an opportunity I ask her not to miss. I beg to move.

My Lords, I apologise for not having been present for the Second Reading debate on this Bill—it is a subject rather dear to my heart—and for not being here at the beginning of this Committee’s proceedings this afternoon. In both cases, I had unmoveable previous commitments. I rise to express broad support for the amendment moved by the noble Baroness, Lady Kramer. She is absolutely right when she says that the Cabinet Office is the right place for a channel of this nature to be located. In later amendments, I will address concerns that the central public fraud authority needs to be empowered to intervene with other departments and be more strongly set up for that purpose. In the context of whistleblowing, I doubt whether it is essential to have this set out in the statute because there is nothing to stop the Cabinet Office setting up such a channel now, but it is an opportunity to ventilate the issue, which we should welcome. Back when I was the Minister for the Cabinet Office, we were trying to simplify the way procurement was done because one of the unforeseen consequences of having absurdly overbureaucratic and overcomplicated procurement practices was that fraud became easier. When we were trying to simplify how procurements were done, we set up something we called, rather misleadingly, the mystery shopper channel. If bidders or suppliers saw, anywhere in the public sector, a procurement that was being done in the old-fashioned way—excessively prescriptive, rigid and expensive for bidders—they could let us know anonymously. They could tip us off, and the Cabinet Office was then in a position to intervene and draw attention to this—often because it was being done at a relatively junior level, without senior people being aware. So I know from experience that a channel of this nature can be very powerful, and many suppliers are immensely appreciative of the value it created for them. I support the approach that the noble Baroness has taken, and I hope the Minister will take that away.

My Lords, I thank the noble Baroness, Lady Kramer, for raising whistle- blowers in respect of the Bill and for highlighting the importance of the protection of those who feel that they must speak out if they see an action or actions that they feel could be fraudulent or not in the public interest. Indeed, it could be actions that should be being taken but are not. Ensuring that we have adequate protections for whistleblowers is vital to building confidence with the people we need to come forward if we are to tackle fraud. In respect of public sector fraud, such people are employed in local authorities or in the Civil Service. If certain protections are not in place, this can have a detrimental effect on recruitment, retention and perhaps career management. In tackling fraud, we will inevitably ask—and, in fact, trust and expect—public officials to make the right calls and decisions in their day-to-day work. These decisions can often be incredibly tough, involving sensitive matters and perhaps involving close colleagues. So reassuring public sector workers that they will be protected when they do the right thing is of paramount importance, and we would support further reassurance from the Government that whistleblowers will be protected and supported when they come forward. Amendment 3, tabled by the noble Baroness, Lady Kramer, presents a sensible proposal for the creation of a whistleblowing reporting channel that would guarantee anonymity and protect whistleblowers, who would themselves be legally defined. The noble Baroness might like to explain in her summing up, however, what she means by “a process to update whistleblowers in cases of fraud”. How would she see this work? On her Amendment 66, we do not think it necessary to establish an office of the whistleblower, although I understand that, as she said, this is very much a probing amendment. It sounds laudable, with laudable aims, but we see this as potential overregulation—the setting up of another body, at an unknown cost and with an unknown number of employees and resources—when we believe that what we need is a proportionate and workable system, as the noble Baroness herself has said in her Amendment 3, and an established process by which fraud is able to be reported with protections in place. There is a danger that if you set up a body such as a specific office for whistleblowing, you can perhaps unwittingly encourage too many false flags, where whistleblowing is almost encouraged and a bureaucracy is created. It is important that evidence of whistleblowing is protected only where it is substantive and where there are protections in place—not flimsy or based on hearsay, for example. Of course, wrongful reporting can have a devastating effect on people’s lives. These are really questions for the Government to answer, because the noble Baroness, Lady Kramer, and I share the same objective: pushing and encouraging the Government, in the Bill, to demonstrate practically what actual new protections there are for those who see or perceive fraud in their area of public sector work, bearing in mind that fraudsters can be cunning and clever. It often surprises one who is ultimately seen to commit fraud—it is often in an unexpected area or from people you would never suspect of committing fraud. I agree with the noble Baroness, Lady Kramer, that it is good to make comparisons with other whistleblowing processes, which she did with a deal of eloquence. I want to make a comparison with the NHS, as I understand that the NHS has upgraded its protections for whistleblowers. Thus Health Education England is listed as a prescribed person under the Public Interest Disclosure Act 1998, which was referred to by the noble Baroness, Lady Kramer. That means that workers at other organisations or companies who wish to raise concerns—in other words, whistleblowing—relating to the education, training and sufficient supply of healthcare workers at their employing organisation or company can do so to HEE. Prescribed persons enable workers to make public-interest disclosures to an independent body where the worker would prefer not to disclose to their employer direct, and the body may be able to take action on the disclosure. We know that whistleblowing is the term used when a worker provides information to their employer or a prescribed person relating to wrongdoing. The wrongdoing will usually, though not always, relate to something that they have witnessed at work. This is also known as disclosure, which was raised by the noble Baroness as well. To be protected by whistleblowing law, a disclosure must be a qualifying disclosure. That means that the worker making the disclosure believes that doing so is in the public interest and it relates to one of the following categories, which I suspect the Committee will be aware of: criminal offence, breach of a legal obligation, miscarriage of justice, endangering health and safety, damage to the environment and covering up wrongdoing in any of those categories. Workers have the right not to be subjected to any detriment as a consequence of making a disclosure. To qualify for protection when making a disclosure to a prescribed person, workers must have a reasonable belief that the matter falls within the prescribed persons remit and that the information disclosed is substantially true. Meeting these criteria is referred to as making a protected disclosure. Workers are encouraged to seek independent advice to help consider whether they might meet the criteria for making a protected disclosure. As the Committee may know, that can be obtained from Public Concern at Work or Speak Up or through a legal representative. In addition, HEE is required to report in writing annually on whistleblowing disclosures made to it as a prescribed person without identifying the workers concerned or their employers. Rather than set up a new whistleblowing body— I have used the HEE as an example—I press the Government to find an existing mechanism, maybe within the Cabinet Office, a body that exists already and can be set up in the public sector and defined as a prescribed person specifically for public sector fraud, rather than setting up a particular office for the whistleblower. We need to recognise that, although we are asking workers to do the right thing, we are also asking them to do something that is emotionally difficult and distressing. People should be empowered to stand up for the correct use of public money, which can happen only if cast-iron reassurances can be given to them. With those explanations, I hope the Government will consider these points as they progress with the Bill, focusing on practical, sensible but proportionate proposals that will encourage people—which is the whole point—to come forward when they are made aware of some wrongdoing.

My Lords, I welcome the amendments tabled by the noble Baroness, Lady Kramer, on the important issue of whistleblowing. Protections for whistleblowing are a key aspect of counterfraud investigations. A huge amount of the information originally received to guide our investigations comes from whistleblowers, so making sure that the appropriate protections are in place is incredibly important going forward. I welcome the opportunity to explore what more can be done and to reflect on what currently exists. It will not surprise the noble Baroness that I am unlikely to commit to a new agency within this Bill today, but I welcome the opportunity to meet her to explore in more detail anything that she believes we can do within the confines of the Bill. I sat through a similar debate on the Armed Forces Commissioner Bill, when we also touched on these issues. I would like to reassure the noble Baroness, Lady Kramer, that the meeting she suggests is one that we have already discussed, but we will now advance it. I will meet all the agencies that she has highlighted to talk about what they do and do not require. Currently, to qualify for the whistleblowing protections provided by the Public Interest Disclosure Act 1998, as inserted into the Employment Rights Act 1996, a worker needs to have a reasonable belief that their disclosure tends to show one of the relevant failures set out in legislation, that the disclosure is in the public interest and that the disclosure needs to be made to the relevant person—for example, the employer, a legal adviser or a prescribed person. The noble Baroness, Lady Kramer, touched on the challenges of using “workers”. DBT guidance sets out the definition of a worker as extending to agency workers and individuals supplied via an intermediary; non-employees undertaking training or work experience as part of a training course, otherwise than at an educational establishment; self-employed doctors, dentists, ophthalmologists and pharmacists in the NHS; police officers; student nurses; and student midwives. So although it is “worker”, there is a slightly wider definition.

17:00:00

Currently for public sector fraud, whistleblowers can make disclosures to a number of prescribed persons where they relate to fraud in the public sector, such as the NAO’s Comptroller and Auditor-General, the director of the Serious Fraud Office, the Auditors-General for Wales and Scotland, the NHS Counter Fraud Authority and various other bodies listed in the prescribed persons order held by the Department for Business and Trade. There are already more than 90 organisations and individuals that a worker may approach outside their workplace to report suspected or known wrongdoing.

In December 2023 the NAO published its Investigation into Whistleblowing in the Civil Service. One of the key findings related to the need to increase awareness of the channels for whistleblowing. This is a key element of this. We can put all the protections in place, but if people do not know that they exist they will not use them. Other findings related to the need to improve the experience of whistleblowing and to ensure that lessons are learned. The Government will use the findings of the NAO report, as well as its good practice guide, Whistleblowing in the Civil Service, to inform our approach.

As my noble friend highlighted at Second Reading, once the Bill receives Royal Assent the PSFA will also explore with the Department for Business and Trade whether it would be appropriate to add the PSFA to the annual list of prescribed organisations. DBT continues to review the prescribed persons list to assess whether additional organisations should be added.

On the specifics raised by the noble Baroness, Lady Kramer, and the noble Viscount, Lord Younger, on updating whistleblowers, under the current regime we can keep people informed but not if we need to keep confidence or they have gone to other people. There is an issue here. I look forward to further discussions on how we can explore that. We also need to consider the impact on court processes and enforcement action regarding how we will report back. It is not as clear-cut as being just an amendment to this Bill. It has to be considered in the round.

Given the intent to maintain the focus of this legislation and the steps being taken by PSFA to improve the whistleblowing offer for public sector fraud, I hope that the noble Baroness, Lady Kramer, can withdraw her amendment at this stage. I commit to ongoing conversations to see what improvements we can make and where.

My Lords, I thank the noble Lord, Lord Maude of Horsham, and the noble Viscount, Lord Younger of Leckie, for rowing in on this issue of real significance. I also thank the Minister, who is clearly taking these issues on board, thinking them through and looking for a way to progress. I would love the opportunity to meet her to explore where I can be helpful. I want to challenge a couple of issues raised by the noble Viscount. The cost is often raised when we talk about creating a specific office of the whistleblower. But in the United States there are offices of whistleblowing in the Securities and Exchange Commission, the CFTC and the Department of Transportation, for example. Every single one of them is now regarded by the US Department of the Treasury as a profit centre, not a cost centre. Their effectiveness in bringing people to trial and achieving fines is so significant that they not only pay for themselves but flow money up into the Department of the Treasury. HMRC has very similar experience. It is now proposing significant financial incentives for whistleblowers on the grounds that this will allow the recovery of lost tax to a degree that will more than pay for the process. There is a real set of questions there. I fully accept that there are many ways in which to do this but I am feeling heartened by the broader receptivity around this issue. I do not think that there is one template that works for all, but there certainly can be a template that would work well within the context of the work that the PSFA will do. On that basis, I beg leave to withdraw my amendment.

Amendment 3 withdrawn.

Amendment 4

Moved by

4: Clause 1, page 1, line 15, leave out “or error” Member’s explanatory statement This amendment seeks to probe the circumstances in which a public authority would recover an amount paid in error.

My Lords, our amendments in this group seek to address some of the limitations that the Bill places on the powers of the PSFA to undertake investigations on behalf of the Minister for the Cabinet Office when it is made aware that fraud is suspected or has occurred in a public authority. It is vital that, in further developing this resource, we ensure that it has the powers and the relevant responsibilities to tackle fraud properly and pose a deterrent to those who seek to commit it in our public authorities. Amendment 4, standing in my name, seeks to probe the circumstances in which a public authority would recover an amount paid in error. It is important that we distinguish, throughout our discussions over these Committee days, between funds that were acquired by deliberate fraud and funds that were acquired because of a mistake. We hope that, in responding to this amendment, the Government are able to make clear their distinction between these two things and how this will be reflected in the exercise of the powers in the Bill. Amendment 5 removes the requirement that public bodies must first request an investigation into suspected fraud before the Minister for the Cabinet Office may undertake an investigation. The Bill as it stands contains a considerable loophole that can easily be exploited if any public authority wishes to avoid an investigation into its affairs. The PSFA needs to have the legal capacity to undertake proactive investigations into fraud when it is made aware of appropriate instances or concerns. To rely on public authorities that may be conducting illegal activities to find it within themselves to own up before an investigation could even commence is far too weak. We need a counterfraud authority that proactively goes after fraudsters, not one that waits to be invited to investigate. We are also concerned that the PSFA, even if a case were referred, could simply refuse to take it out of hand. There is no requirement for the PSFA to justify when a case has been refused if it chooses to do so, and we cannot therefore be certain that the information referred would be acted upon. This creates a direct disincentive for organisations to make representations to the PSFA to initiate an investigation. Why risk the reputational damage of an investigation if it could simply be refused for no apparent reason? This is an issue that we will seek to address and that I hope the Government will consider as an amendment to the Bill. Amendment 6 would enable the PFA to undertake fraud investigations into HMRC and the DWP. This is an opportunity for us to simplify and co-ordinate counterfraud efforts across the public sector. We must ensure that we do not create a two-tier system in which some authorities are accountable to the Cabinet Office and others are not. This amendment would ensure that the PSFA can exercise these powers to prevent fraud and recover funds across these major public bodies to address the asymmetry that the Bill creates. Our Amendment 7 balances our proposition that the PSFA be empowered to undertake proactive investigations with the control measures that would limit the use of the powers granted under Part 1 by requiring the Minister to be satisfied that there are reasonable grounds to suspect that fraud or attempted fraud has occurred. This test would ensure that investigations could be initiated only on reasonable grounds. The Bill as it stands provides considerable powers to the Cabinet Office in order to combat and prevent fraud. We need to ensure that these powers are exercised responsibly, carefully and for good reason. Our amendment would hold investigators in the Cabinet Office to a higher threshold before they could begin to exercise these powers, which will protect both the Cabinet Office and the people under investigation from abuse. Finally, our Amendment 8 would ensure that the fee charged to any public authority by the PSFA would not exceed the amount of money that was recovered. This is a sensible amendment that would ensure that a fraud investigation did not come at a net detriment to the public authority. We feel that providing a legal guarantee to public authorities that they will not be left out of pocket as a result of an investigation is an important reassurance that must be made in the Bill. Our amendments in this group seek to implement sensible, balanced improvements to the powers and role of the PSFA. By allowing this body to undertake proactive investigations into public authorities, which will include the DWP and HMRC, we will close the loophole in the Bill that allows public bodies to dodge investigations simply by failing to request one. This is balanced with controls on the powers of the PSFA requiring a reasonable grounds test to be met before commencing an investigation, and ensuring that any charges made out to public authorities do not exceed the amount of money recovered. We broadly support the Government’s proposition, although we feel that the purpose of this part—to recover money, combat fraud and deter future offences—will be better met if our amendments are incorporated. I beg to move.

My Lords, I will speak to Amendments 5 and 6 in the names of my noble friends on the Front Bench. As I have said, I was the Minister for the Cabinet Office for five long years, during the entirety of the coalition Government—I am not sure that anyone else has been there for that long. Despite the best efforts of some in the higher levels of the Civil Service to have me promoted, moved sideways or eventually fired, I survived and outlasted them all. This was when the coalition Government took over—a time of fiscal crisis, with a budget deficit of some 11% of GDP—and it was urgent that the costs of government should be reduced. We were pretty successful in that: we reduced the running cost of government cumulatively over five years by £52 billion. We were DOGE before anyone had thought of it, and, frankly, we did it much more effectively. One of the elements that we pursued was fraud and error, and indeed debt. We were surprised to discover that activity to counter fraud, reduce error and recover debt was not being seriously co-ordinated. You would have thought that this would be a core function of the Treasury but it was not; the Treasury’s view was that this should all be done in each of the individual silos, and of course that militates against effectiveness. On the skill sets around countering fraud, et cetera, we concluded that this was a cross-cutting function that runs right across government and needs to be seen in that way. We started to introduce in a slightly makeshift way—piecemeal, making it up as we went along—what we now call the functional model. This is where these cross-cutting functions—procurement, IT and digital, major projects, and HR—are strongly led from the centre of government, with visibility into what is happening in those functions right across the Government. Of course, it is through all those functions, including financial management, that the money gets spent. However, the Treasury’s view, which is true of most finance ministries anywhere in the world, is that it looks at the verticals, and if something is in an approved budget line, that is it—you get on and do what you like. There is an underlying assumption that all public servants are equally concerned about conserving public money but, regrettably, that is not universally the case. It is essential that there should be proper central oversight. Given the reluctance of the Treasury to take this seriously—as my noble friend Lord Agnew demonstrated vigorously when he resigned in the middle of a speech on exactly this subject, highlighting the reluctance of the Treasury to give it sufficient focus—the Cabinet Office is the place for this to be done. There needs to be proper oversight into how these functions are being run and are operating, and providing some real-time accountability rather than waiting for the Public Accounts Committee some time after the event, generally after the horse has bolted. That is why allowing the Minister, through the Public Sector Fraud Authority, to intervene only at the request of a public authority seems justifiable in relation to the wider public sector, but in relation to central government departments, agencies, authorities and so on, it seems to be wholly indefensible. There is an assumption that all these authorities and entities will be so concerned to disclose what has gone on in their departments, in their own backyards, that they will willingly ask the Cabinet Office to intervene and be charged a fee for the privilege. I have to say that real life tells us that this is unlikely to happen because we have real-life experience to look at. When, during the coalition Government, it was disclosed that in one major department two suppliers to government had been systematically overcharging that department over not just a short period but a decade or so, it turned out that this had been known about for some time.

17:15:00

To pick up the point made by the noble Baroness, Lady Kramer, on the last group of amendments, the whistleblower was in fact someone seconded into that department from the Cabinet Office, someone relatively junior who was outraged by what had been seen and drew it to the attention of the Cabinet Office. That meant that it was not going to be swept under the carpet because it was an embarrassment. It was disclosed, and a haemorrhaging of public money was brought to an end.

In another department where I was the Minister, I discovered that something similar had been happening. It had been going on for some time, and the whistle had been blown 12 months before, but nothing was done. That is unacceptable. The assumption that all the Civil Service leadership, and probably Ministers as well, of every department and agency will be so concerned to wash their dirty linen in public that they will invite the Cabinet Office in seems quite unrealistic. This amendment, which would remove the need for the Cabinet Office to be invited in to investigate wrongdoing, is essential.

Likewise, regarding Amendment 6, why should the ability to undertake investigations in DWP and HMRC be excluded? These are the places where the cases are likely to be the biggest, simply because of the volume of what they do. Why is it to be assumed that they are fine and there is no need for any oversight of them at all? We know that the quality of the skill sets and the capability in these departments is not at all uniform and often is not up to the level that is required to be truly effective. I totally agree with what the Minister said earlier about how important this is. She made the point vividly. No one can argue with the fact that the victims of this kind of fraud are every taxpayer, and the numbers are extremely big.

This needs to have oversight from the centre. The truth is that, particularly in areas such as the recovery of debt, central co-ordination is essential. When we looked at the debts owed to HMRC and DWP, often from overpayments made by error, but also unpaid fines to the Ministry of Justice, we found an extraordinary degree of overlap. The right thing to do in terms of recovering money and also of treating people humanely and compassionately should be to aggregate that debt and deal with it as a single debtor because there will be some debtors who cannot pay but others who will not. It is important that those who cannot pay for reasons that may well be beyond their power to control should not receive numerous demands from different parts of government. Aggregate it and deal with it all together and you are much more likely to get the money back from those who can pay but will not, while treating respectfully and compassionately those who cannot pay but would like to. It is important that this should be done in a co-ordinated way, yet the Treasury’s whole philosophy is against that because it all has to be done within silos.

The ultimate absurdity of that approach came when we were working with, we hoped, HMRC to look at recovering debt more effectively. We developed a scheme where some outside bodies would collect debt on behalf of HMRC and be paid a commission on what they recovered. We were told that the Treasury would not allow that to happen because all the money that they recovered from debtors was AME, so-called annual managed expenditure, but the commission that would be paid to them would be DEL, a delegated expenditure limit, so it was a different kind of money, even though the money that got paid to the entities recovering money was actually taken out of the money that was being brought in. It took months to overcome this ludicrous approach in the Treasury, which is far too deep-seated and which is the enemy of looking after public funds effectively.

I strongly urge the Government to take this away and look at how the authority can be set up under the Minister for the Cabinet Office and accountable to Parliament for what it does so that there can be real-time, serious horizontal visibility and leadership of these functions right across central government. Then we might at last get back to what we started to do in the coalition Government, which was to get a proper grip on this issue. We did that by having a cross- government taskforce—a very good model, actually—jointly chaired by me and by the late, greatly lamented Lord Heywood, then the head of the Civil Service. That meant that it got taken seriously across government and we started to see results coming through.

I intervene only because the whole debate on these amendments seems to dwell on what a public authority is. We have heard from the noble Lord, Lord Maude, about the Treasury and central government, but my version of public authority would come down to local authorities, which as far as I am aware are public authorities. I will talk from experience because I was a councillor in the London Borough of Barnet for 28 years, and for the last four years of that I chaired its audit committee. To my mind, what is missing in the Bill and the amendments is the use of audit procedures, which exist in many public authorities. That is where the investigation should start, at the lowest cost and more effectively. The noble Lord talks about HMRC. The reason why it failed is that the outside body that had this work subcontracted to it collected the low-hanging fruit. It collected the frauds that were easy to collect because there was money in the individuals, companies or organisations involved. I ask the Minister and her team to think about how to stop attacking only low-hanging fruit. It is the ones that are not dealt with by the existing organisations that we are looking at. Encourage local authorities to set a gold standard where they and anything like them will look at the situation internally and assess where the fraud is. At that stage, it may well be that they want to call in these organisations. The noble Lord, Lord Maude, says they perhaps should not be called in, but they should be if needed. We need to use the things that exist already. To me, the fact that the word “audit” does not appear anywhere here is a negative part of this measure.

The noble Lord’s point about what we mean when we talk of a public authority is really important. I make a distinction between entities that are part of central government—where the writ of the Cabinet Office and the Treasury should absolutely run without exception for these purposes—and the wider public sector. I believe in localism; local authorities should be responsible for what they do and have access to a centre of excellence of great capability in central government. But there should be a sharp distinction made between central government and the wider public sector.

My Lords, I apologise; to some extent I moved onto what sounded more like a Second Reading speech, but it comes out of the comments that the noble Lord made. Not just central government bodies but other public bodies must use the investigatory powers, where they are already there, and bring in the heavy guns only when needed. So I accept what the noble Lord, Lord Maude, says.

My Lords, I feel rather inadequate after hearing the last few speeches, which were excellent in their expertise and in making me think about the issues, and after the earlier discussion led by the noble Baroness, Lady Kramer, on whistleblowers. I feel as though I am going to learn a lot from these debates, so I apologise, as I am raising just a few simplistic issues in this group on the chapter that has been labelled “Key concepts”. As we start Committee, I draw attention to how the Government have been explicit that the powers in the Bill are designed to target error in addition to fraud. Error does indeed account for substantial losses of public money, so I have no problem with the Bill doing both but, too often, it seems that its powers—many of which are too draconian—are applied equally to fraud and error without distinction. I am broadly in favour of looking at Amendment 4, which seeks to probe the circumstances in which a public authority would recover an amount paid in error, as we need to make a distinction between error and fraud. In general, many of my concerns, although largely confined to the section of the Bill dealing with the DWP and welfare, are on the dangerous conflation between fraud and error. If we do not keep them distinct, there will be unintended consequences from this Bill, and I am very worried about disproportionality in justice and so on. I would be interested to hear how the Minister responds to Amendment 4. I am also very sympathetic to Amendment 7, which requires that: “the Minister is satisfied that there are reasonable grounds to suspect that fraud or attempted fraud … has occurred”. That notion of reasonable grounds is very important for this Bill and, sadly, it is too often absent. I think it can lead, for example, to suspicionless surveillance, which we will be talking about later in Committee. I want to quote the written evidence given to the Public Bill Committee by the cross-party law and human rights organisation Justice. It emphasised that: “This requirement for reasonable grounds is a well-known legal requirement in the context of state investigations: it is a safeguard to protect individuals from baseless state interference and fishing expeditions”. It is very important that the requirement for reasonable grounds is taken very seriously throughout our discussions, so I was glad to see Amendment 7. Although it is now completely after the effect, and I feel like this is a cliché, I will say congratulations to the noble Baroness, Lady Anderson. I kind of feel like the moment might have passed, but I have to say that her announcement at the start of the debate cheered me up.

17:30:00

My Lords, this has been a very useful debate, and I hope to be able to give some clarity on some of the issues that have been raised. It would be remiss of me, and I should have done it earlier, not to thank the noble Lord, Lord Maude, for starting the process of where we have ended up today. He and the noble Baroness, Lady Finn, started a great deal of this under the previous Government. We are now seeking to ensure that the PSFA has the appropriate powers to deliver what they started. Before I move on to the substance of this group, I think it would be helpful to respond to a question that was touched on by the noble Lord, Lord Palmer, about what a public authority means with regard to the Bill and what we are actually talking about. Public authority is defined in Clause 70 “Interpretation”. The definition is: “‘public authority’ means a person with functions of a public nature so far as acting in the exercise of those functions”. It would include, for example, other government departments, arm’s-length bodies and local authorities. This is a broad definition that takes in a wide range of organisations and delivery mechanisms for public functions to ensure that fraud against the public sector in its widest sense can be tackled. Whether a body comes into the definition of public authority will be tested before a case is adopted, but let us be clear that, especially when we are talking about fraud, it would be surprising if someone was targeting the public sector and they stopped at the remit of one government department just because we define it as one government department. We all know, and noble Lords who have served in government are even more aware, that MHCLG, the Cabinet Office, the DfE and the Department of Health will have multiple users that may touch on different levels of fraud, which is why it is important that we have the breadth of definition. On the substance of this group, Amendment 4 would remove error from the scope of the amounts that the Minister can recover. This would significantly change and restrict the scope of the PSFA’s recovery function. It would mean that, if the PSFA investigates a case and does not find fraud but does find that a person has had money that they were not entitled to, it would not be able to take action to recover it, including using the debt powers in the Bill. The PSFA would have to refer the matter back to the public authority concerned to take whatever error recovery actions it is willing and able to take. In response to concerns raised by many noble Lords, including the noble Baroness, Lady Fox—I am pleased that I was able to make her happy at the beginning of Committee stage—it is very likely that the PSFA will encounter payments that could be classed as error. Fraud and error are difficult to separate. Indeed, the National Audit Office and the PSFA do not attempt to do so in their measurement methodology. This is because proving fraud requires evidence of intent, and it is often impractical or impossible to do so. One of the purposes of the Bill is to do more to evidence fraud and take the right action to tackle it, but I hope noble Lords will agree that when you have money that you are not entitled to, you should pay it back and it should be recoverable if it is not paid back. That has always been a principle that the Government have adopted. Before I move on to wider detail, I want to touch on some comments made by the noble Baroness, Lady Finn, on the loophole for public authorities. Public authorities are the victims, not the perpetrators. Even without powers, the PSFA enforcement unit is getting referrals. We do not foresee a shortage of cases coming our way. The PSFA must be able to triage and pursue the most impactful and value-for-money cases. This is a genuine question—which is why we are here in Committee—of culture and approach, and one that we should have a conversation about. The Government genuinely believe that a collaborative approach with other government departments will yield more co-operation in terms of investigations than a more aggressive approach. Being invited in will ensure that government departments actively engage with us, as has proven to be the case during our pilot so far. I believe it will assist your Lordships’ Committee if I briefly set out the circumstances in which a public authority would recover an amount of money. Accounting officers of public authorities are required to follow the principles set out in the HM Treasury publication Managing Public Money in annexe 4.11, which is— apparently—readily available to noble Lords. The relevant section states: “Most organisations responsible for making payments will sometimes discover that they have made overpayments in error. In principle public sector organisations should always pursue recovery of overpayments, irrespective of how they came to be made. In practice, however, there will be both practical and legal limits to how cases should be handled. So each case should be dealt with on its merits”. Amendment 5 would remove the words: “only at the request of that public authority” from Clause 2(1). I believe the intention of this amendment is that PSFA should be able to simply decide to open a fraud investigation irrespective of the wishes of the target of fraud, in the same way that the police can open an investigation into other crimes. However, omitting the deleted words but not otherwise changing the clause would create an element of uncertainty over who is responsible, in the first instance, for dealing with fraud against a public authority. At the moment, it is clearly the public authority. If the intention of this amendment is that it should be for the Minister for the Cabinet Office to decide to investigate, whether or not the public authority wants the Minister to step in, this may conflict with the preservation of public authorities’ own fraud functions in Clause 2(5)(b). Responsibility for managing fraud is, in the first instance, given to accounting officers of public authorities, as set out by Managing Public Money annexe 4.9—which I am sure all noble Lords have read. There may also be other unintended consequences by the adoption of this amendment, specifically whether the revised working of the clause might actually compel the Minister for the Cabinet Office to investigate all public sector fraud. That is something beyond the current capacity of the PSFA, which I am sure we will discuss in great detail later in Committee. If the PSFA finds fraud off its own bat, as it were, it might not then be clear on what legal basis, if any, it would be able to recover it, as it would not be acting on behalf of the public authority per se. The Government seek to maintain the status quo of acting at the request of public authorities as a matter of operational practice as set out in this Bill, in order to prevent any confusion. The noble Lord, Lord Maude, raised a query about the Treasury not taking this seriously. The PSFA reports to the Cabinet Office and HMT. It works closely, advising HMT on fraud as part of the spending review process. I hope that that is somewhat reassuring, given where we are in the spending review process. Amendment 6 would remove the restriction in Clause 2(2) on the PSFA undertaking cases at the request of the DWP and HMRC. This would be a significant change in policy intent. HMRC and DWP have 84% of the counterfraud resource across His Majesty’s Government, including thousands of people and their own designated powers. The PSFA role envisaged is supporting those departments which do not have well-developed fraud investigation, enforcement and recovery functions or powers, not seeking to subsume those with targeted powers that are already well established. For once, this is a government department not seeking to gather other people’s power and staff. Neither HMRC nor DWP need the further assistance of Part 1 of this Bill and there are many other public authorities which do.

If the Minister does not mind, can I pick up the issue that the noble Lord, Lord Maude, raised? Nobody knows how to manage government more closely than him; he is deeper steeped in this than any of us. How does the Minister anticipate dealing with the fragmentation of investigation? If HMRC is chasing down someone, you can almost be certain that it will be dealing with public procurement in a different way and that there will be other issues around that particular entity. Is there a mechanism she sees that will break down those siloed lines?

I reassure your Lordships’ Committee, particularly the noble Lord and the noble Baroness, that the PSFA and HMRC or the DWP can and will do dual investigations and work closely together. They have their own powers. I think the case of HMRC is probably more relevant than the DWP, but they will work collaboratively and do joint operations while having their own separate remits. It is not that they will not work together; however, we anticipate that especially where there is evidence—as I said earlier, it is about breadth of government—we would expect the majority of the PSFA’s work to be outside of those government agencies or public authorities. Amendment 7 is unnecessary because it straight- forwardly duplicates matters already dealt with elsewhere in the Bill. Clause 1(1)(a) states that the Minister is given the function of investigating “suspected fraud” against public authorities. Clause 70, the interpretation clause, defines “suspected fraud” as “conduct which the Minister has reasonable grounds to suspect may constitute fraud”. I hope that the noble Baroness, Lady Finn, is content that the issues she raises in this amendment are appropriately dealt with. Finally, Amendment 8 would restrict the fees that the PSFA could charge a public authority for investigation, enforcement or recovery action to no more than the amount that is recovered. Cash recovery is the hardest part of enforcement. Many initiated investigations will close without reaching the recovery stage—for example, because no fraud is found, an alternative approach is taken or because recovery is not possible even if the investigation is successful. The amendment would mean that no fee could be charged in those cases, despite the PSFA having necessarily invested resources into the investigation with the agreement of the public authority to have taken the case and undertaken the actions in the first place. That does not represent good value for money and runs contrary to the guidance in Managing Public Money on cost recovery. In the most serious cases, cash recovery may not be the main or even a major factor; it will be the disruption of criminal gangs and prosecution of serious offenders. Such cases may be long, complex and multi-agency, and costs will probably exceed any potential recovery quite quickly. In cases of organised crime, assets may be irretrievable, laundered beyond reach or overseas. The public interest in investigation is to punish the criminals. The adoption of this clause would also fail to acknowledge or promote the deterrent effect of the investigations. The PSFA cannot be restricted in the cases that it selects by how much of its costs it can recover; that is counterproductive and counterintuitive. I have two other points to raise.

I beg the noble Baroness’s pardon but, if the PSFA can charge more than it recovers, is that not a massive disincentive for the public authority to ask it to come in to begin with, given that it has to ask ?

There is a balance here, because of the positives that go alongside this. There is a genuine issue that, if a criminal gang is actively targeting a public authority, the investigation and prosecution of those people in itself is something that the public authority would wish to see. There will always be costs involved in criminal activities, even if they cannot all be recovered. The police actively investigate criminal gangs, with the pragmatic understanding that not all costs can be recovered. There is also a deterrent effect in prosecuting people to ensure that everyone is aware that, if you defraud the state, you will be prosecuted. We will not always be able to get the money back, but we must be realistic about what is in front of us and what we can achieve.

I have not thought this through, but a no win, no fee approach seems quite useful. If the PSFA, which will have many successful prosecutions where it brings in fees that are well above its actual costs, it will have a resource that will surely allow it to pursue cases where there is not a successful recovery but where it is important for the case to go ahead. I am just wondering whether there is not a model that might work more effectively.

The noble Baroness makes an interesting point. That is why the Cabinet Office and the PSFA are adopting a test-and-learn approach to see what will and will not work. Having said that, we have to be realistic that we will not always be able to recover funds and someone has to pay for the cost of the investigation. The balance of what that looks like is something we will have to explore as cases progress.

17:45:00

On the point made by the noble Lord, Lord Maude, that debt should be co-ordinated centrally, for debt measures in the Bill the PSFA is working with government debt-management functions that the noble Lord established and are now part of His Majesty’s Treasury.

On the very valid point made by the noble Lord, Lord Palmer, about how to avoid low-hanging fruit, we are building an expert central capacity with all the powers that are in the Bill. We hope that there will be a balance across government in the cases that we take. Some will be very complex and take many years while others will demonstrate the value of having this function and making sure that we are protecting government funds. I assure noble Lords that we will not just be going after low-hanging fruit.

Having explored each of these amendments in turn, I hope the noble Baroness, Lady Finn, will be prepared to withdraw her amendment.

My Lords, on this occasion I want to thank all noble Lords who have contributed. I hope that the Minister will recognise what we are proposing in this group are a series of amendments that would make meeting the objectives and purpose of the Bill easier. I thank her very much for her constructive approach. I especially enjoyed listening to the quotations from Managing Public Money, which used to be quoted extensively at me when I was in the Cabinet Office. The proposals in the amendments would ensure that fraud could be proactively investigated and counteracted. That is the only way that we will bring fraud rates down, provide an effective deterrent to potential fraudsters and prevent departments dodging oversight by failing to request an investigation. The noble Lord, Lord Palmer, made the sensible case that public authorities must not go only after low-hanging fruit and duck difficult investigations. I spent five long years as my noble friend Lord Maude of Horsham’s special adviser while he was in post. I spent that time learning from him, especially on the reluctance of the Treasury to engage properly with recovery on fraud. I am delighted that the PSFA has a dual remit and will report to both HMT and the Cabinet Office, but working closely with the Treasury was always a construct where the Treasury would assert its primacy, and I hope that does not happen in this instance if it works negatively. I had a strong sense of déjà vu while listening to my noble friend Lord Maude of Horsham. He is correct when he says it is wholly indefensible that the PSFA must wait to be invited to conduct investigations into wrongdoing, and we will be probing on that. The DWP does not wait to be invited before it goes after benefit cheats, and there is no reason why public officials should be held to a different standard. The exclusion of DWP and HMRC is perplexing. My noble friend Lord Maude of Horsham correctly picked up on that and made the case—convincingly, I thought—for their inclusion in the remit. The PSFA must always operate in the public interest, and ensuring that we have adequate thresholds for investigations is a well-established, sensible proposition. Our amendment would ensure that that threshold was included in the Bill so that we could be reassured that the PSFA would operate only once the reasonableness test had been satisfied, a point that was picked up by the noble Baroness, Lady Fox. The same can be said for a legal guarantee that recovering fraud must not come at a cost to the public authority in question. In conclusion, we believe that our amendments in this group would improve what the Government have already set out in the Bill, and we hope the Committee will support us in incorporating these improvements. On that basis, I beg leave to withdraw the amendment.

Amendment 4 withdrawn.

Clause 1 agreed.

Clause 2: Interaction with other public authorities etc

Amendments 5 to 8 not moved.

Clause 2 agreed.

Clause 3: Information notices

Amendment 9

Moved by

9: Clause 3, page 2, line 32, after “and” insert “reasonably” Member’s explanatory statement This amendment seeks to ensure the Minister is required to have a reasonable belief that an information notice would be proportionate in each case.

My Lords, the powers granted in this part of the Bill are necessary in principle, although the core principle of proportionality, which guides our approach on these Benches, means that we have some suggestions for improvement. We need to make sure that this system has adequate safeguards, protections and balance. I want to reiterate the view that in pursuit of a legitimate objective, we do not succumb to a temptation for overreach or powers which are too sweeping. Our Amendment 9 introduces a reasonableness threshold, which has to be met before an information notice can be submitted. This amendment is designed to ensure that the information notice, which imposes a duty on the relevant person to provide information to the Minister, is imposed on that person only if there is a reasonable belief that the information notice would be proportionate. We need to bear in mind throughout these discussions that the Bill establishes a substantial array of duties and responsibilities, and we need to make sure that when powers are exercised, they are done so with those burdens in mind. Our proposal that these powers can be exercised only when seen as reasonably proportionate incorporates this balance and will ensure that additional operational burdens are not imposed unless thought necessary. Further, Amendment 10 seeks to protect the person to whom the information notice relates from unfair treatment ahead of any final conclusion about their liability. Banks and financial institutions, particularly when the Bill first comes into effect, will naturally be concerned that they are being asked to provide information about one of their customers in relation to fraud. It is feasible that the said bank may want to withdraw some banking services from the person in question, and it is therefore a reasonable demand that the Government make clear that the person in question is not necessarily guilty of the suspected fraud. We need to make sure that the verdict is not inadvertently passed on the person before a conclusion is reached, and this amendment would ensure that an investigation does not end up constituting a sentence. Our Amendments 11, 12, 13 and 14 all address the technicalities of the review mechanism and seek to probe the Government on why they have set up the review mechanism in the way that they have in the Bill, Amendment 11 questions the Government on why they have defined 10 working days as the lower limit for the period in which the person to whom the information notice is given has to comply with the demands in the notice. Can the Minister assure the Committee that this period has been set based on a discussion with relevant persons to whom this duty will apply? Again, we need to recognise that this is a duty being imposed on third parties, and we need to balance it with the other activities undertaken by those persons. Amendment 12 seeks to clarify how a review process could be initiated by the person to whom an information notice is given, which, alongside Amendment 13, seeks to make it easier for the person to review this decision with a longer timeframe. Amendment 14 would oblige the reasons for any decision reached following a review to be set out in writing, placing an additional duty of responsibility and accountability to the Minister for the steps they decide to take. Alongside the reasonableness test outlined in our Amendment 9, these provisions work to make sure that the powers under the Bill are exercised proportionately and that they are balanced alongside adequate provisions for review, which will promote the sensible application of these notices. Finally, Amendments 15 and 16 seek to protect the information of a person which has been shared with the Minister by limiting the people with whom that information can be shared. Defining in law that only specific people can have sight of personal, sensitive information is a proportionate check on the power of the Minister and will have the twofold benefit of protecting people who, we must remember, are not actually necessarily guilty of fraud, with the need to check their information to ascertain this fact. The principle of obtaining information about a person is necessary for the provisions in the Bill to work and the objectives we all share to be met. Our amendments seek to nuance and improve the exercise of these powers by adding a reasonableness test, a clarification of the review process and additional controls on data sharing to protect those to whom the information notice relates. We hope that the Government and noble Lords across the Committee will recognise these improvements to the provisions currently set out in the Bill on information notices and the relevant review processes, and that these will be supported as measured and balanced proposals. I beg to move.

My Lords, I will very quickly make a couple of comments on Amendments 9 and 10. First, on Amendment 9, I have an amendment later in Committee that inserts a reasonableness point in a similar way, so I support this. However, I wonder whether this amendment is actually in the wrong place; I suggest that it ought to be in the initial line—“the Minister should reasonably consider”—as opposed to “reasonably proportionate”, but that is a small issue. I support the concept of Amendment 9. Amendment 10 is quite important. This issue has been raised by the banking industry, and there is a very real concern that the receipt of a notice might provide reasonable grounds for the financial services firm to know or suspect that the customer has defrauded the public sector. In that situation, the failure to take action, for example to close or restrict the account, might conflict with wider anti-money laundering obligations and, possibly—I am not sure this is right—the corporate criminal offence of failure to prevent fraud. That might include having to exit customer relationships and so on. So there is a very real concern from the financial services industry here. I am sure that that is not the intention of the Government in this situation but it is something that we need to think about, as the receipt of a notice cannot be seen as reasonable grounds to suspect fraud, because that would set all sorts of hares running against people who might be entirely innocent.

My Lords, I will just pick up the issue that has been raised by the noble Lord, Lord Vaux. We are dealing tomorrow with a statutory instrument that attempts to provide safeguards against banks and other organisations deciding to close people’s bank accounts or to deprive them of other financial services. It is often the people who are under the most financial pressure who find it difficult to get banked in the first place. They can get a basic bank account if they are lucky, but to get a bank account with any of the features that make financial life reasonable is exceedingly difficult. I therefore share the noble Lord’s concern that we do not start a hare running. Banks are eager to offload people who do not have a lot of exciting and interesting activity. If this notice gives them an excuse to do that, I can see that an awful lot of banks will seize that opportunity, so I raise this as an issue to be wary of. In fact, we have an SI going in the opposite direction tomorrow, so this is really for the Government to make sure that one hand knows what the other hand is doing.

My Lords, I apologise in advance, because I think we are about to have a vote—or not, if the noble Baroness, Lady Kidron, does not press her Motion. Some significant points have been touched on in this very short debate. I will respond to each amendment in turn. Amendment 9 looks to introduce a test of reasonableness to determine whether an authorised officer has appropriately considered that information sought is both necessary and proportionate. Clause 3(1)(a) and (b) already set out the test for issuing an information notice: an authorised officer will have the power to compel information only when it is necessary and proportionate to do so, and only when the information being requested relates to a person whom an authorised officer has reasonable grounds to suspect has committed fraud.

What the Minister says is not quite true. It is where “the Minister considers” that it is necessary and proportionate to do so, not simply where it is necessary and proportionate to do so. That is an important difference—hence the reasonableness requirement.

The noble Lord is going to inspire me to go into more detail. There must be reasonable grounds to suspect that fraud has taken place, which follows the basic rule that there must be an objective basis for that belief. It must be genuinely suspected that the fraud has been carried out by the individual, and the belief must be based on facts and/or information that are relevant to the likelihood of needing to obtain information for the purpose of investigating suspected fraud against public authorities. It must be objectively reasonable for them to suspect this, given the information available to them. The reasonable grounds test is a standard and widely accepted test used by various organisations, including the DWP, the Serious Fraud Office and the police. We are seeking to replicate that.

18:00:00

I reassure your Lordships’ Committee that we will stipulate in guidance that authorised officers must consider each time whether the use of the powers is justified when deciding whether a request for information should be made. This includes ensuring that the use of the powers is a proportionate way of obtaining the information deemed necessary for the purpose. We believe that the principle of reasonableness is already reflected in the drafting but also supported by our commitment to include this in guidance and independent inspection of powers.

On Amendment 10, I understand the intent behind the amendment and agree with it. The noble Lord, Lord Vaux, and the noble Baronesses, Lady Finn and Lady Kramer, raise very valid points, and I assure your Lordships’ Committee that this will be included in the issued guidance for authorised officers to ensure that information notices make it clear that it is an ongoing investigation and no inference should be made that the individual specified on the notice is guilty.

The noble Lord, Lord Vaux, raised issues of the impact on banks and their financial crime obligations. We have held extensive talks with UK Finance, the FCA and the banks themselves regarding this area. We believe that the information notices that will be issued by the PSFA’s enforcement unit will have little material effect on the banks, as the information notices can be issued only where there is a suspicion of fraud. We do not think it would be appropriate to tell banks what they should or should not do in respect of their existing reporting obligations. The measures in the Bill are not intended to absolve banks of their wider financial reporting obligations. I appreciate the concern and hope that this is reassuring to noble Lords, but I am open to ongoing conversations about guidance versus the Bill.

On Amendment 11, our approach in the Bill accommodates the variation in size and type of fraud investigations that the PSFA is likely to undertake. The Bill provides a minimum of 10 working days to comply, but in practice the information notice will be tailored on a case-by-case basis, each case being judged on its own merits, with the time period applied appropriately. This is a similar approach to that used by HMRC, and I assure the noble Baroness, Lady Finn, that we have engaged with the relevant third parties.

John Smart, a former partner at Ernst & Young who led on its forensics work, and a current PSFA board member, stated in the oral evidence sessions in the other place:

“Some of the smaller organisations might struggle to meet that 10-day requirement”—

that is why we will tailor it—

“but I still think it is a reasonable starting point. If you do not start with a reasonable starting point, for the larger organisations you end up deferring decision making and action being taken. I think 10 days is reasonable”.—[Official Report, Commons, Public Authorities (Fraud, Error and Recovery) Bill Committee, 25/2/25; col. 46.]

Amendments 12, 13 and 14 specifically look at Clause 4, so I will address them together. An information notice will, as drafted in Clause 3(4), detail how, where and the period within which information must be provided. This will also provide information on how an information holder can make a request for a review. The current drafting allows the PSFA’s enforcement unit to maintain flexibility on how an information holder seeks to request a review.

18:03:00

Sitting suspended for a Division in the House.

18:15:00

I shall begin where I left off. I was responding to Amendments 12, 13 and 14. It is necessary that an appropriate period is provided for a first or third party to request a review of an information notice. That is why we introduced the seven-day period for information holders to request a review. This ensures that those attempting to hold up an investigation by requesting a review for no necessary or legitimate reason do not hold it up for an extensive period. If all safeguards were fully utilised as outlined across the Bill, it could already result in delays to the investigation of two years or more, potentially enabling continuing activities that defraud public authorities in that time. We are seeking to make every effort to balance appropriate safeguarding with effectiveness and protecting the public purse. Extending this period to 28 days would add an unnecessary delay in the investigative process. Amendment 14 would have no material effect over and above what has already been drafted as, in the event that the notice is upheld or varied, details will be provided to the information holder in order to inform their next steps, should they continue to not comply. On Amendments 15 and 16, while I am sympathetic to the intent of the amendments tabled, we believe them to be unnecessary. It is vital that any data-sharing powers between public authorities are done in a way that is relevant and effective for an investigation. An example of this would be sharing information with the public authority that has been defrauded or with the Serious Fraud Office. Imposing a prescriptive list of persons—who could regularly change—who can have information disclosed to them will restrict the intent and scope of the Bill. The clause details that information can be disclosed only for the purpose of exercising the core functions of the Minister, which already restricts to whom and for what purpose the information can be disclosed. The Bill already contains safeguards to ensure that all data processing, including data-sharing, must be done in accordance with current data protection legislation, which is why I hope that the noble Baroness, Lady Finn, is prepared to withdraw her amendment.

My Lords, as we draw this stage of the debate to a close, I want to reiterate our position that the powers granted in this part of the Bill are in principle necessary. I thank the Minister for her response, but necessity must always be accompanied by proportionality. That guiding principle sits at the heart of the contributions we on these Benches have made today and of how we will approach the remainder of Committee. We have sought throughout to ensure that the powers conferred by this legislation are tempered by appropriate safeguards and a clear sense of balance. In the pursuit of the legitimate and shared objective of tackling fraud against the public purse, we must be vigilant not to reach for powers that are unduly sweeping or risk unintended harm. Amendment 9 introduces the threshold of reasonableness before an information notice can be issued. This is about recognising that every power granted imposes a corresponding burden. We must ensure that those burdens are justified and not excessive, although I absolutely take the point the noble Lord, Lord Vaux, made about where the word “reasonably” should sit. We will look at this going forward. Amendment 10 would provide protection for individuals who may find themselves the subject of an information notice and who are not yet found liable, but are potentially facing premature consequences. The noble Baroness, Lady Kramer, raised similar concerns in this area. We want to prevent a situation in which an investigation becomes, in effect, a sentence. Banks and financial institutions in particular need clarity that a notice does not equate to guilt. Amendments 11 through 14 examine the review mechanism proposed in the Bill. We have asked the Government to justify the 10-day working compliance period in an information notice and whether this reflects realistic operational constraints for third parties. We have also sought to strengthen the ability of the recipient to initiate a review, to provide more time for that review to take place and to require that the Minister’s reasoning be clearly set out in writing. These are sensible and measured proposals that will promote accountability and reinforce the legitimacy of the process, as attested by the justice group in its review. Lastly, Amendments 15 and 16 address the handling of sensitive information. We propose that any data shared with the Minister under these powers be subject to tightly defined restrictions on further disclosure. This is a proportionate and necessary check, protecting individuals who may never ultimately face action while still allowing the Minister to undertake the task of fraud prevention. The underlying objectives of this Bill are ones that we all share. Our amendments have been crafted to ensure that these objectives are pursued in a way that is fair, balanced and lawful. They offer reasoned improvements, a reasonableness test, a clearer and fairer review process, and better protections for personal data. I hope they will be supported at a later stage, but for now I beg leave to withdraw the amendment.

Amendment 9 withdrawn.

Amendments 10 and 11 not moved.

Clause 3 agreed.

Clause 4: Reviews

Amendments 12 to 14 not moved.

Clause 4 agreed.

Clause 5: Information sharing

Amendments 15 and 16 not moved.

Clause 5 agreed.

Clause 6 agreed.

Clause 7: Police and Criminal Evidence Act 1984 etc powers

Amendment 17

Moved by

17: Clause 7, page 5, line 22, at end insert— “(5) Within six months of the day on which this section comes into force, the Minister must prepare and publish guidance on the process by which authorised investigators are appointed in accordance with subsection (3).”Member’s explanatory statement This amendment would require the Minister to set out the process by which authorised investigators are appointed in statutory guidance.

My Lords, our amendments in this group are based on a recognition of the fact that we are granting sweeping powers to investigators in the PSFA, to be exercised in the name of the Minister. This is, again, all about proportionality. Amendment 17 would require the Minister to set out in statutory guidance the process through which authorised investigators are appointed. In combating fraud, we must protect against the creation of opaque but powerful bodies with inadequate oversight and accountability. Justice, a cross-party law reform and human rights organisation working to strengthen the UK justice system, recognises this amendment as an effective measure that would bring much-needed clarity to the process of appointment and the standards under consideration in that process. Amendments 18, 19 and 20 relate to property. Amendment 18 seeks to probe the Government on the sort of changes they anticipate may be deemed necessary by the courts in relation to seized property. Before we vote to endorse this part of the Bill, I hope that the Government will take this opportunity to provide greater clarity on how they expect that the powers provided for under this part will be exercised, which is a particularly important point of clarification given that we are talking about property seized by the state. Amendments 19 and 20 combined would prolong the period of time that must pass before an order to dispose of or destroy the seized property can be enacted. The seizure and destruction of personal property is a substantial power, and we must balance the practical consideration of holding seized property with a view to protect the rights of the individual to property which is theirs and which they have a right to recover. We believe that extending this period from six months to one year is a proportionate measure that would balance the practicalities of the process with the rights of the citizen. Amendment 21 relates to oversight of the exercise of powers granted to the Cabinet Office under the provisions in this clause. If the Government deem it necessary to grant powers of this scale to the Cabinet Office in order to combat fraud, this must come with the acceptance that proper oversight and review of how those powers are used is a concurrent responsibility. This should not be left to the discretion of the Minister and ensuring that oversight is properly exercised from day one is a vital change. Amendment 22 is an important measure designed, again, to ensure that sensitive information can be disclosed only to relevant persons. Although I am sure that this is simply an oversight in how the Government have drafted the Bill, clarifying the persons to whom information can be disclosed is an important safeguarding measure that would inspire confidence in investigations and ensure that confidence in the relationship between the IOPC and the PSFA is strong from day one. I hope that the Government and noble Lords will recognise this as a sensible improvement, which seeks to facilitate the role of the IOPC in the way that the Government have outlined. The amendments in this group are rooted in a single, guiding principle: the exercise of significant powers by the state must always be matched by strong safeguards, transparency and oversight. We recognise the necessity of equipping investigators with the tools to combat fraud, but we must not do so at the expense of proportionality or the rights of the individual. From the appointment of authorised investigators to the seizure and potential destruction of personal property, these powers touch on serious questions of liberty, accountability and trust in our institutions. Our amendments seek to ensure that powers are not only effective but clearly defined, properly scrutinised and subject to checks that protect both the public interest and individual rights. In strengthening the role of oversight, clarifying the limits on data sharing and demanding clear standards in the appointment and exercise of authority, these are far from wrecking amendments; they are constructive and measured. They reflect the careful, balanced approach we must take when legislating in areas where the state touches most directly on the lives and property of citizens. I hope the Government will engage seriously with these proposals and that noble Lords across the House will support them. I beg to move.

My Lords, I will be brief. The Minister will be aware that false bailiffs knocking at your door are a major scam, and the PSFA clearly would not intend or hope to be a source of opportunity for people pursuing a scam in claiming to be part of its activities. Has the Minister had the opportunity to talk to people such as those from StepChange to try to get a feel for how to deal with people who are vulnerable from whom they need to collect property or recover items? Has that charity been involved in shaping the framework for this particular set of issues?

My Lords, your Lordships are speedy and my Chief Whip is confused, but I appreciate the opportunity to discuss some important issues and to put on the record things that I hope will reassure noble Lords. Before I move to the substance of the amendments tabled by the noble Baroness, Lady Finn, I will respond to the question posed by the noble Baroness, Lady Kramer. I have not met StepChange, but that is an interesting suggestion. We have engaged with wider stakeholders. With regard to how the PSFA will be using the PACE powers that we request, that is in the next group of amendments so we will discuss those in more detail then, if that is okay. I will revert, and I will ensure that I have a meeting with StepChange before we progress such conversations. The people behind me are nodding at me. As this group of amendments addresses three distinct areas of concern, I will take those in turn. I will start with the recruitment of authorised investigators. Under Amendment 17, the Minister would have to prepare and publish guidance on the process by which authorised investigators were appointed within six months of the Bill coming into force. We do not believe that the amendment is necessary. The PSFA is bound by well-established Civil Service recruitment principles under- pinned by relevant legislative provisions. All recruitment to the role of authorised investigator will be based on merit via fair and open competition. Clause 7(3) of the Bill states that an individual can become an authorised investigator only if they have been authorised by the Minister to exercise the PACE powers conferred in the Bill. The Minister will not make such a determination unless they are content with the evidence provided to them demonstrating that the candidate has been suitably trained in the use of PACE powers and is ready to take on the responsibility of utilising them safely. All authorised investigators will receive bespoke training that will cover all aspects of investigative practice, including the relevant PACE powers. Training will be to the same standard as other law enforcement bodies that use PACE powers. Authorised investigators will work to clear operational guidance to ensure that they are delivering the use of the powers in a lawful and transparent way. They will also become members of the government counterfraud profession, and their training will align with the profession’s investigator standard. Existing investigators within the PSFA’s enforcement unit, who will work to become the PSFA’s first authorised investigators, bring with them a wealth of relevant knowledge, skills and experience from previous roles in both the police and investigation services within government departments. These powers will be in safe hands. I hope noble Lords find that reassuring. The disposal of property is incredibly important. On the face of it, the purpose of Amendment 18 is to remove the provision of the PSFA to make any changes to the relevant property that the court considers necessary for the purposes of avoiding or reducing any risk of the property being used in the commission of an offence. Noble Lords have indicated in the explanatory statement for the amendment that they wish to probe “the Government’s expectations of what types of changes to seized property may be deemed necessary by the courts”.

18:30:00

Let me provide some reassurance on what this might look like in practice. This could mean that the PSFA seeks the court’s permission—all these decisions will be made by the court—to delete specific files from a laptop or remove specific papers from a bundle of documents before they are returned to their owner. Imagine that the PSFA seizes a laptop and, upon detailed review, discovers that it contains thousands of national insurance numbers that have been illegally obtained. The PSFA would make the necessary referrals to other law enforcement agencies but could end up in a scenario where it retains the laptop.

Once the investigation and any court proceedings have got to the point where it is necessary to return the laptop to its owner, it would be entirely inappropriate for the PSFA to return the laptop without removing the relevant files containing national insurance numbers. The key here is ensuring that the PSFA does not find itself in a situation where it is stuck retaining an item indefinitely, at ongoing cost to the taxpayer, as it cannot return the item without fear that, once returned, the item could be used in the commission of an offence, with additional costs. By then, the laptop might be somewhat out of date, but we are where we are.

Amendments 19 and 20 seek to extend the period for which the PSFA must wait before it can act on a court order related to the destruction or disposal of property from six months to 12 months. Six months is a sufficient period to allow further applications to be made to the court once an order has been granted. Amendment 20 is consequential to Amendment 19, so there is no need to speak to that further. We are very clear that six months is a reasonable amount of time and that 12 months just means that we are storing property for longer than we would wish to, with associated costs.

Amendment 21 seeks to change the wording in Clause 9, which enables the Minister for the Cabinet Office to make regulations, from “may” to “must”. Clause 9 provides for the Independent Office for Police Conduct to review serious incidents and complaints that could arise from the PSFA’s use of PACE powers. Specifically, it amends the Police Reform Act 2002 to extend the IOPC director-general’s functions to include oversight of authorised public sector fraud investigators. While the Bill gives the IOPC the power to carry out reviews without the Minister having to pass regulations, the regulations will allow the Minister to tailor the functions specifically to the PSFA and allow for payment to the IOPC for its work. Therefore, the proposed wording would create an obligation to make regulations where none currently exists, although I assure noble Lords that tailoring regulations will be laid. We will be back here, in the Moses Room, to debate such regulations.

Amendment 22 seeks to limit who can have access to the information disclosed to them on behalf of the director-general of the IOPC under Clause 9 to those who are employed within the IOPC. Clause 9(3) includes provisions for the Minister to disclose information to the director-general or person acting on behalf of the director-general. The director-general refers to the DG in the IOPC. The amendment restricts disclosure to an employee of the IOPC, which would defeat the objective. Our drafting, however, mirrors that of other agencies included in the Police Reform Act 2002, such as the National Crime Agency, the Gangmasters and Labour Abuse Authority and the Food Standards Agency. None of those has a requirement for the person to be employed by the IOPC.

While it is right and proper for these points to be considered, the proposed amendments are not necessary. I therefore hope that the noble Baroness, Lady Finn, withdraws her amendment.

My Lords, as we conclude this group of amendments, I return to the fundamental point at the heart of our proposals. These powers, granted to investigators in the name of the Minister, are substantial. With them comes a responsibility on us as legislators to ensure that they are exercised fairly, transparently and proportionately. Once again, I thank the Minister for her courteous explanation and response. This Bill seeks to equip public authorities to tackle fraud more effectively. We support that goal, but it is precisely because we support the objective that we believe that the framework within which these powers operate must be clear, balanced and just. Amendment 17 would introduce a duty to set out statutory guidance on how investigators are appointed, which is a practical step, endorsed by Justice, that would ensure clarity and prevent the emergence of opaque, unaccountable enforcement structures. Amendments 18 to 20 address the issue of seized property. I listened very carefully to the example of the seized laptop, but Amendment 18 seeks to probe the Government on the nature of the necessary changes to seized property that may be authorised by the courts, and we are asking the Government to clarify what kinds of modifications or uses they envision and under what circumstances. Transparency on how that property may be altered or used is essential. Amendments 19 and 20 relate to the disposal or destruction of seized property. As the Bill currently stands, property may be destroyed or disposed of after six months. We believe that is too short a period, especially in complex cases where legal processes or appeals may still be ongoing. Our amendments would extend this minimum period to 12 months, offering individuals a more realistic opportunity to recover their property if it turns out that the seizure was not ultimately justified. Amendment 21 addresses the question of oversight. The Government have taken the decision to grant significant new powers to the Cabinet Office in this section of the Bill. That is a serious move, and one that must be accompanied by serious scrutiny. Amendment 21 would ensure that oversight is built into the system from the start. Finally, Amendment 22 offers a simple but vital clarification around the handling of sensitive information. This amendment would ensure that the information gathered under investigatory powers can be shared only with persons who are relevant and necessary to the investigation. Taken together, these amendments form a coherent and proportionate package of improvements. They do not challenge the fundamental aims of the Bill; rather, they support them. But they do so while insisting that the exercise of power must be lawful, justified and always subject to scrutiny. I hope that the Minister will reflect on the points made, and on that basis I beg leave to withdraw the amendment.

Amendment 17 withdrawn.

Debate on whether Clause 7 should stand part of the Bill.

Member’s explanatory statement

This is probing and seeks to establish why the Government considers it necessary to grant these powers to authorised investigators.

My Lords, it is me again. Our proposal in this group is that Clause 7 and the corresponding Schedule 1 do not stand part of the Bill. The powers granted to civil servants under the provisions in this clause are sweeping, and we believe that they are better exercised by those with adequate training and experience—namely, police officers. I will cover in a little more depth what this clause is proposing. Clause 7 would allow junior civil servants in the Cabinet Office—relatively junior, at HEO level—to apply to a Justice of the Peace for a warrant to enter and search premises for material relevant to an indictable offence. These civil servants can enter the property whether the relevant person is present or not, and they will have the power to seize anything if they have reasonable grounds for believing that it has been obtained in consequence of the commission of an offence or is evidence in relation to an offence. Section 20 would grant these civil servants the power to seize computerised information, and Section 22 would allow PSFA investigators to retain seized property for as long as necessary in all circumstances. These are police powers, yet under this clause they are to be exercised not by police officers but by civil servants who, however well intentioned, are under no legal obligation to have the legal training or operational experience that should be required to exercise such powers responsibly. We believe that if an intervention required as part of an investigation is serious enough to justify a search warrant and serious enough to justify entering a person’s private premises and removing their belongings, it is serious enough to require the presence of a police officer, who is recognised as the proper legitimate authority who should bear the responsibility for exercising these powers. There is a practical point here too. If the Government believe that fraud against the state requires this level of intervention, they should work with law enforcement to build capacity, not bypass it. It is the job of the police to investigate crime, including fraud; that is the basis for their training. That is the established legal framework in which they operate and that is what the public expect. We should not seek to empower civil servants to do the job of police simply on the basis of current operational capacity. Once again, we return to our maxim of proportionality: we need to make sure that the necessary powers in the Bill are exercised responsibly and in a way that is both balanced and effective. I want to be clear that what we are proposing will not prevent the PSFA undertaking its investigations. Once the threshold for the exercise of these powers has been met, the investigation itself will have had to progress considerably if a warrant is to be issued. Given the way these powers are set out in Clause 7, the Government are obviously certain that investigations will be able to proceed substantially without the need for these powers. Our proposal that they be removed from the remit of civil servants and held instead by the police, which is the established, recognised authority that largely wields these powers at present, will therefore not infringe on the capacity of the PSFA to investigate fraud, as recognised by the Government. This is therefore another exercise in balance. We believe that our suggestion that Clause 7 and the corresponding Schedule 1 do not stand part of the Bill balances the need to counteract fraud with the imperative that we do not grant sweeping powers to civil servants who are not sufficiently trained, experienced or recognised to exercise them in the proportionate, measured and sensible way we need to be able to guarantee in the Bill. For those reasons we do not believe that Clause 7 and Schedule 1 should stand part of the Bill. We urge the Government to reconsider this approach and to ensure that powers of this magnitude are exercised only by those with the proper training, the proper accountability and the proper role: our police services.

My Lords, the noble Baroness, Lady Finn, has said it all, so I will be very brief. I have to say that I am extremely uncomfortable with giving these sorts of police powers to civil servants and others. We have an example in the recent past of powers being used inappropriately by a non-police agency in the Post Office Horizon situation. I am very uncomfortable about it. I am interested to hear why we should not allow the police to deal with these things and why we should give them to civil servants, but I will take some convincing.

My Lords, I think it is now my turn to say, “I’m back”. This is a very important part of the Bill, and it is right that we discuss it in some detail. It was also raised by the noble Baroness, Lady Kramer, in the previous group. I thank the noble Baroness, Lady Finn, for flagging her concerns regarding the PSFA seeking powers under the Police and Criminal Evidence Act 1984. For ease, I will now refer to it as PACE. Clause 7 designates authorised investigators with the necessary authority to use limited provisions from PACE within the remit of public sector fraud investigations. Specifically, they are the power to apply to the courts for a warrant to enter and search premises and seize evidence and special provisions to apply to the courts to gain access to certain types of material which are regarded as excluded material or special procedure material. These powers will only be used in criminal investigations to enable all reasonable lines of inquiry to be followed and all relevant evidence to be collected. To reassure noble Lords, when executing a search warrant, authorised investigators will be accompanied by an officer who has the powers of a constable. This could be either a police officer or an officer from another government department, such as HMRC or the NCA, with the powers of a constable. They will ensure the safety of the authorised investigators and will be able to use their own powers of arrest or reasonable force if necessary. We are not seeking for the Cabinet Office to have powers of arrest. They will always be accompanied by appropriate officials who have powers under PACE. Authorised investigators will adhere to the relevant PACE codes of practice, which provide robust safeguards around the use of these investigative tools. Every application for a search warrant or a court order under PACE must be scrutinised and authorised by the court. Authorised investigators will also be subject to robust internal and external scrutiny. This will come from the PSFA’s independent person, as appointed under Clause 64, His Majesty’s Inspectorate of Constabulary and Fire and Rescue Services and, as required, the Independent Office for Police Conduct. To reassure the noble Lord, Lord Vaux, we are very aware of the Horizon scandal and the impact that that had on normal people’s lives. We want to put in every safeguard to make sure, and we hope we have, that these powers could not be used to replicate such a scandal. The PACE powers sought in Clause 7 are the minimum necessary to allow the PSFA to effectively undertake criminal investigations. We are not seeking the full use of PACE powers under this clause for the PSFA. Turning to Schedule 1, this modifies the provisions of PACE adopted in Clause 7 so that they apply appropriately to authorised investigators within the PSFA. Schedule 1 provides a route for authorised investigators to apply to the court for access to excluded material. Access to special procedure material is provided under Clause 7 and Schedule 1 to PACE. It also establishes a legal framework that allows the PSFA to transfer evidence seized under PACE to other organisations, securing the chain of command—I mean the chain of evidence. It has been a long week; I was getting married a week ago.

18:45:00

Clause 7 and Schedule 1 are codependent: both parts are necessary to give the PSFA the PACE powers sought, which are key to the future effectiveness of the PSFA. For example, these powers will enable the PSFA to execute a search warrant to secure business records that help to prove that a business was not entitled to a government grant. They will give authorised investigators the power to seize a laptop or mobile phone that could hold incriminating correspondence that helps to prove who was involved in a conspiracy to defraud a public authority; and the power to apply to the court to gain access to excluded or special procedure material—material that is rightly subject to additional safeguards but could be the key to unlocking an investigation into a government department that has been defrauded out of thousands of pounds of taxpayers’ money.

Without these powers, the PSFA will not be able to effectively conduct criminal investigations into fraud committed against public authorities. In cases that appear to warrant criminal investigations, the PSFA would have no choice but to look to refer the matter to another law enforcement body. This is entirely contrary to the PSFA’s aim of reducing the burden on existing law enforcement and the Government’s aim of improving our ability to identify and tackle fraud committed against public authorities.

This is about ensuring that money that has been fraudulently paid out is pursued and reclaimed wherever possible and that those responsible are held accountable for their actions. For these reasons, I urge the noble Baroness, Lady Finn, not to press her opposition to Clause 7 standing part of the Bill.

My Lords, the Minister mentioned a number of safeguards, including the authorised officer being accompanied by a police constable. I cannot find any of that. Where can I find those safeguards?

The noble Lord raises a very interesting point. It is in the guidance, but I will write to him so that he has a written record.

My Lords, I thank the Minister and repeat that to spend her honeymoon in this way is truly admirable. Our proposal in this group is straightforward: that Clause 7 and the corresponding Schedule 1 do not stand part of the Bill. The powers set out in them are neither minor nor administrative; they are both sweeping and consequential, as the noble Lord, Lord Vaux, pointed out. They are powers to enter private premises, to search them in the absence of the owner, to seize property and to retain it indefinitely if deemed necessary. Clause 7 permits junior civil servants in the Cabinet Office to apply for search warrants in connection with indictable offences. These officials, who are under no legal obligation to possess police-level investigative training or operational experience, would be empowered to enter someone’s property and seize anything they believe is linked to a criminal offence. They may seize computerised information. They may retain this property for as long as they consider necessary. These are serious powers. They are, in every meaningful sense, police powers, and we believe that it should be the police who exercise them. That is not a theoretical objection; it is a practical one. If the Government believe that the investigation of fraud against the state demands this level of intervention, they should work with law enforcement to build capacity, not attempt to bypass it—as I said previously. The public expect these duties to be undertaken by the police, not officials from within the Cabinet Office. We are not proposing an end to investigations by the PSFA—far from it. We recognise the importance of this work, and the Government’s own framing of this clause makes it clear that investigations can proceed substantially without the need for these powers. If that is the case, transferring this responsibility to trained police officers, rather than allowing civil servants to exercise it, would not hinder the PSFA’s ability to investigate fraud. It would ensure that intrusive state powers are exercised by those who are properly equipped to wield them. This is a matter of constitutional balance and operational integrity. Clause 7 and Schedule 1 confer powers that go beyond the traditional remit of the Civil Service. They risk blurring the lines between executive authority and law enforcement. We therefore hope that noble Lords across the Committee, and the Government, will consider supporting this proposal as a measured change, keeping powers in the remit of those who are best placed to exercise them, while ensuring that PSFA investigations can continue in the pursuit of the objectives we all support.

Clause 7 agreed.

Schedule 1 agreed.

Clause 8: Disposal of property

Amendments 18 to 20 not moved.

Clause 8 agreed.

Clause 9: Incidents etc

Amendments 21 and 22 not moved.

Clause 9 agreed.

Committee adjourned at 6.50 pm.