Public Authorities (Fraud, Error and Recovery) Bill

(Limited Text - Ministerial Extracts only)

2nd reading
Thursday 15th May 2025 Lords Chamber

Moved by

[Baroness Anderson of Stoke-on-Trent]

That the Bill be now read a second time.

[Baroness in Waiting/Government Whip (Baroness Anderson of Stoke-on-Trent) (Lab)]

My Lords, I am proud to bring this Bill to your Lordships’ House with my noble friend Lady Sherlock. I am grateful for the engagement that we have had with noble Lords on the Bill so far and look forward to working with your Lordships as the Bill progresses. I also look forward to hearing the maiden speech of the noble Baroness, Lady Spielman, which I am sure will be excellent—good luck!

There have always been people who commit fraud. Sadly, this is not a new problem, but over the past decade fraudsters have become increasingly sophisticated in the techniques that they use to steal people’s money, using data, technology and a variety of scams. Banks and similar entities have transformed their ability to spot and stop fraud and to protect their customers’ money. They have invested in new technology and changed processes, but this Government believe that the public sector has not proactively followed their lead. In 2023-24, fraud and error against the public sector reached an astonishing £55 billion. That includes: fraud against our public services, including those who abuse the tax system; fraud by dishonest companies that use deception to win public contracts; and benefit fraud by criminal gangs and individuals. In 2024-25, benefit fraud and error stood at a staggering £9.5 billion a year.

Fraud against the public sector is not a victimless crime. It takes money away from vital public services, erodes trust and harms innocent people. It is ultimately public services that suffer, and it is taxpayers who are the victims of this crime. They are rightly incensed when their money lines the pockets of criminals. It is theft from the taxpayer—from every single one of us. Delivering this Government’s plan for change is possible only if we do more to ensure that taxpayers’ money is protected and spent wisely. The Government made a manifesto commitment that they will safeguard taxpayers’ money and will not tolerate fraud or waste anywhere in public services. This Bill is part of our plan for delivery.

I turn to the detail of the legislation before us. Part 1 of the Bill contains measures that gives the Public Sector Fraud Authority—I will refer to it as the PSFA for the rest of my speech—within the Cabinet Office powers for the first time to tackle fraud across the public sector on behalf of government departments and public bodies that do not have the capability, capacity or powers to do so. Noble Lords will know that the scope of the activity of the state is vast.

Fraudsters will attack vulnerabilities wherever they can find them, and the impact is not just on the state but on real people. For example, in a case referred to the PSFA earlier this year, a firm had received £370,000 in funding to provide skills training, having, it is believed, provided false or inaccurate details to create the false impression that the criteria for the funding scheme were met when in fact they were not. Not only does the fraudster gain, but the money is diverted from people who could legitimately benefit from it. In another example, a grant of £125,000 was awarded to a youth group focusing on community activities. It did not go to the intended purpose but was, it is believed, defrauded. That money would have had a direct impact on the ground in the community, but did not, because we were defrauded, as were that community.

At the moment, however, it is difficult for public authorities that have been defrauded, or the PSFA or other authorities, to take the kinds of actions that the public expect against these and other much larger frauds that take place. It is extraordinary that they cannot get the necessary information to prove the offences and do not have the powers to take enforcement action or recover funds.

Part 1 of the Bill puts this right. It builds the foundational structure for a long-lasting change in how public authorities take action on fraud where they cannot do so now. First, the Bill will provide the PSFA with powers to obtain search warrants from the court to enter premises and seize evidence as part of fraud investigations. So in the skills case I mentioned, the PSFA would have been able to go into the so-called provider’s premises and seize payroll and enrolment records to prove whether it was entitled to the funding. These powers will be used only when approved by the courts, and the police will continue to be responsible for arresting suspects if required.

Secondly, the Bill contains measures for the PSFA to compel businesses and individuals to provide information where there is a suspicion of fraud against the public authority, and to penalise them if they do not. In the youth group case, PSFA could have required business records to be provided using these powers. Separately, the Bill also provides powers to allow the PSFA to request communications from telecom providers using the Investigatory Powers Act 2016, authorised and overseen by the Investigatory Powers Commissioner’s Office. When fraudsters conspire to attack the state, this power will enable investigators to connect to their network and show who is involved. The Bill also enables information-sharing between the PSFA and other parties in the course of a fraud investigation, which is vital in tackling multi-agency cases.

Thirdly, the Bill introduces the power to impose civil penalties on behalf of other public authorities against those who have committed or have tried to commit fraud. These penalties can be used as an alternative method of taking action against fraudsters, compared to often lengthy criminal prosecutions. The introduction of civil penalties for fraud means that there can be meaningful consequences for breaking the law, even when criminal prosecution is not appropriate or viable.

Fourthly, the Bill will introduce new debt recovery powers for the PSFA, so that we can get public money back from those who can afford to repay but refuse to do so. This includes powers to recover fraud-related or error-related debt from an individual’s earnings, using a deduction from earnings order, or directly from financial accounts using a direct deduction order. These are broadly similar to existing powers used across government, including by HMRC. I reassure your Lordships’ House that there will be strong safeguards in place for these powers, to ensure that vulnerability is considered and deductions are affordable and fair. The PSFA’s authorised investigators and officers will be highly trained, to the same standards as the police, for the criminal powers in Part 1 and will be members of the Government Counter Fraud Profession, which sets high standards of professionalism, ethics and integrity that members must meet.

Finally, to address some of the fraud we saw over the pandemic, the Bill will double from six to 12 years the time limit for civil claims to be brought in alleged cases of Covid fraud, giving public authorities more time to investigate complex cases relating to those who exploited a national emergency for personal gain. It is an affront that some people used the time of a national crisis to loot the public purse, and this Government are committed to taking action, of which this is the first step.

Part 2 is focused on addressing fraud and error in the social security system. Here, the Bill will modernise, extend and strengthen DWP’s existing counter-fraud powers, bringing it in line with other bodies such as HMRC. It introduces new powers that will improve DWP’s access to important data that can be used to find and prevent fraud and error more quickly and effectively and, crucially, improve DWP’s ability to recover money from taxpayers. Taking each of these in turn, first, there are comparable powers to those I described for the PSFA, which will allow authorised investigators in the DWP to apply for and obtain search warrants to enter premises and seize evidence relevant to fraud investigations. These powers will be used by specialist DWP serious and organised crime investigators. This will reduce DWP’s reliance on the police and, as in the PSFA’s case, these powers will be used only when approved by the courts; the police will continue to be responsible for arresting suspects.

Secondly, the Bill will update DWP’s information-gathering powers for investigating fraud. At present, DWP has the powers to require information from only a limited list of third parties. This does not include key organisations and sectors that could help to prove or disprove suspected fraud—for example, airlines, which might hold travel records that are relevant to investigations of fraud conducted overseas. To add to that, there is limited ability to require responses to requests to be sent electronically; currently, DWP cannot make someone provide this information digitally. This approach is somewhat outdated in a digital age and underlines that the changes in the Bill are long overdue. The Bill widens who the DWP can compel information from, and it will enable us to require the information to be provided digitally by default. This is comparable to the information-gathering provisions I described for the PSFA earlier.

Thirdly, the Bill makes provisions for the DWP’s new eligibility verification measure, which will enable the department to require banks and other financial institutions to provide crucial data to help identify incorrect benefit payments that people might be getting as a result of not meeting the rules for their benefit—for example, if someone has too much in savings, which could make them ineligible for a benefit, or if they are fraudulently claiming benefits while living abroad when they should be living in the UK. This data will mean that we can identify potential incorrect payments much sooner for key eligibility criteria.

We know that people lead busy lives and sometimes genuine mistakes happen. That is why this measure is so important, as it will help to identify not only potential fraudulent cases that require further investigation but errors too, ensuring that the DWP can correct errors quickly, and preventing people building up large debts that they then need to repay. In response to considerable misinformation about this measure, I want to stress to your Lordships’ House that under the eligibility verification measure, the DWP will not be able to access people’s bank accounts or look at what they are spending, nor will it be able to share any personal information with banks. Furthermore, this data will be considered without the presumption of any wrongdoing. No decision about benefit entitlement will be made from the data gathered through this measure alone; and, crucially, any final decision about someone’s benefit entitlement will always be taken by a human being. The Information Commissioner has noted that this proposal addresses many of the concerns the commissioner held about the previous Government’s proposals.

The fourth element of Part 2 is about broadening DWP’s abilities to punish fraudsters using a financial penalty as an alternative to seeking prosecutions. At the moment, DWP can give financial penalties only in cases of benefit fraud. Part 2 extends our ability to use them in the cases of fraud against any type of DWP payment. For example, if we have a future grant scheme similar to the Kickstart employment scheme, we will be able to ensure that that money could be recouped. This will ensure that more fraudsters committing a wider range of fraud can be dealt with swiftly without going to court.

Finally, the Bill contains new debt recovery powers for DWP. These powers will enable the DWP to recover money in cases where a person owes the department money but is not in receipt of a benefit or in Pay As You Earn employment, where there are existing powers. This will be used only where people repeatedly refuse to agree to affordable voluntary repayment terms with DWP. In these cases, the Bill will enable DWP to obtain from banks the bank statements of these debtors, to verify that they have sufficient funds to pay. Having considered this information, DWP debt enforcement agents will determine what is an affordable deduction, with maximum limits for regular deductions set out in the legislation. DWP can then recover the money from their bank accounts, through either a one-off lump sum or regular deductions. This will be done in a fair and manageable way, with time for the person to make any representation, and the right to appeal. No one will be pushed into hardship because of this action.

As a last resort, if someone owes DWP more than £1,000 and puts their money out of reach of our other recovery methods, DWP can apply to the court to disqualify that person from driving for up to two years. This is similar to the powers the Child Maintenance Service has been able to use for the last 25 years in cases where a parent repeatedly refuses to make payments to support their child, and it has proved somewhat effective in encouraging debtors to engage with the process. A court will not be able to make a DWP disqualification order if it considers that the person needs a driving licence for work or for another essential purpose, such as if the person is disabled or a carer. This disqualification order will always at first be suspended, and repayment terms will be set by the court. A person will be disqualified from driving by the court only if the repayment terms the court has set are not met without good reason. This measure is for people who have repeatedly refused to engage with DWP’s debt management system and have actively frustrated the process of debt recovery. It is an important power that is designed to bring debtors to the table to agree voluntary, affordable and sustainable repayment plans with the DWP.

We are clear that an individual keeping money to which they are not entitled is serious and will result in serious consequences. These powers ensure fairness in debt recovery, seeking to guarantee that those who are no longer on benefit or in paid employment are not treated more favourably and able to evade repayment of money owed to the public sector.

Parts 1 and 2 come with strong new safeguards, including provision for independent oversight and reporting. The Cabinet Office and the DWP will commission His Majesty’s Inspectorate of Constabulary and Fire & Rescue Services to undertake inspections on the use of the new investigations powers that both departments are using. The DWP will make a similar arrangement with His Majesty’s Inspectorate of Constabulary in Scotland and the Independent Office for Police Conduct will handle any serious complaints that arise from the use of the new powers of entry, search and seizure for the PSFA and the DWP. The Police Investigations and Review Commissioner will deal with similar matters for the DWP in Scotland.

Separately, the Minister for the Cabinet Office will appoint an independent person to inspect the PSFA enforcement unit’s use of the powers in the Bill. Their work will complement and build on the oversight provided by the inspectorate. The Secretary of State for Work and Pensions will also appoint an independent person to oversee the use and effectiveness of the DWP’s new eligibility verification measure in line with the legislation and the code of practice. Both independent persons are required to provide reports to respective Ministers which must be published and laid in Parliament.

Codes of practice will accompany relevant parts of the Bill and, where appropriate, will be consulted on. Drafts of relevant codes will be made available to noble Lords ahead of Committee. Across the Bill, provision is made for persons subject to the powers to make representations, request reviews or appeal against decisions. These routes will be clear and provide opportunities to challenge the Government’s approach.

Many of the measures in this Bill are not novel to government. Instead, they modernise existing powers and bring the DWP and the PSFA in line with other public bodies, such as HMRC. Overall, this Bill will help deliver the biggest crackdown on public sector fraud in a generation. It is expected to save £1.5 billion over the next five years as part of wider action in the DWP’s efforts to save £9.6 billion.

The Bill delivers the biggest upgrade to the DWP’s counterfraud powers in more than 14 years. It brings in new powers to tackle fraud right across the public sector by empowering the Public Sector Fraud Authority, and not before time. Our approach is tough but fair. It is tough on criminals who cheat the system and steal from taxpayers, and tough on people who refuse to pay back money, but fair on claimants, by spotting and stopping errors earlier and helping people to avoid getting into debt. It is fair on those who play by the rules and rely on the social security system, and it is fair on taxpayers, by ensuring that every pound is spent wisely, responsibly and effectively on those who need it. I beg to move.

--- Later in debate ---

[The Parliamentary Under-Secretary of State, Department for Work and Pensions (Baroness Sherlock) (Lab)]

My Lords, I thank all noble Lords who have contributed to today’s thoughtful and decidedly not-at-all dull debate. Committee will be some fun indeed. It was a particular pleasure to hear the maiden speech of the noble Baroness, Lady Spielman, whom I welcome to the spreadsheet fan club. Frankly, I could have done with one of her spreadsheets to keep track of all the questions that I have been asked today. In the absence of that I am bound to miss some, for which I apologise in advance, but I will do my best. It is good to have her among our number, and I look forward to hearing more from her in future.

Perhaps we should start briefly with the challenge that the Bill is designed to address. As my noble friend Lady Anderson made clear at the start, public fraud is simply not acceptable—as the noble and learned Lord, Lord Garnier, said, fraud is not acceptable generally, but public sector fraud is also not acceptable. Fraud does not become a victimless crime because it is directed at the state: it will cheat the public purse of money that could be spent on public services, which could help this Government deliver an NHS fit for the future or invest in our children to give them the best start in life.

Listening to some of the examples given by my noble friends Lord Rook and Lady Alexander, it is so shocking that, during Covid, when people and charities were out there breaking their backs trying to serve people who were in desperate need, others were out there lining their pockets. It is a disgrace. It was very moving to hear from my noble friend Lady Alexander about what is happening when people are doing all that they have had to do in the British Council to pay that back when others do not want to pay back the money that they should be paying back to the state. That cannot be right.

I also think that fraud in our social security system is damaging in a different way, whether it is undertaken by individuals or organised criminals. I think the noble Baroness, Lady Kramer, asked what the breakdown of that was. I can tell her that, in 2023-24, of the £7.3 billion lost in fraud in social security, 6% was taken by organised gangs and the rest was taken by individuals.

[Baroness Kramer (LD)]

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

[Baroness Sherlock (Lab)]

It is a percentage of the amount of fraud that was recognised. Clearly, we do not have figures for the amount of fraud of any kind that has not been identified or recognised. That was the figure for the amount we have on our books as organised fraud.

The reality is that, whether it is done by organised criminals or by individuals, this is not okay. It is not fair to taxpayers who fund social security, nor to the vast majority of people who claim only the benefits to which they are entitled. In my job, when money is as tight as it is now, I want every penny available for social security to go to the people who need it most.

This Government are determined to tackle the issue head-on with a Bill that will provide the right tools to protect public money and fight modern fraud, coupled with the right safeguards. The Bill is tough on those who commit fraud against our public services or our welfare state. In doing so, it gives reassurance to taxpayers. One of the side effects is that it will be helpful to DWP claimants who make genuine mistakes, by helping to spot errors earlier so they can avoid getting into lots of debt.

I thought the point made by the noble Baroness, Lady Spielman, about reciprocity was there. If people do not have confidence in our welfare state and the underpinning mutual shared obligations, that challenges our ability to maintain confidence and carry on supporting people in the future. We need to get this right, but we do not need to demonise people to do that. We just need to make it clear that people should get what they are entitled to, and, if they are not getting that, we should address it.

We believe this Bill strikes the right balance, giving the Government new powers proportionate to the problem we are tackling while ensuring that those powers are wrapped around with effective safeguards and protections to give confidence to Parliament and the country. Having said that, and having listened to the debate, I recognise that it is just possible that not everybody agrees with us—or, at least, not yet. We have some way to go. I have every confidence that, once I have fully explained this, there will be unanimity across the House—or near-unanimity at least, being a realist.

Having listened to the debate, it seems to me that there are a number of challenges. First, I offer a couple of truisms. There is no silver bullet to fraud. If there were one single thing to do, the previous Government would have tackled this, or some other Government would have done it. Tackling fraud is an accretion of a series of small decisions which, between them, add up to make a difference. Therefore, this Bill does what it does and does not do other things: it does not tackle bank robbers or tax evasion. It is a contribution, and I think it is an appropriate one.

Secondly, we have to be a bit careful that the best is not the enemy of the good. What is in front of us is action that this Government will take that has not been done before, and I commend it to the House. The challenges that we have seem to come in three broad categories: we are not going far enough, we are going too far, or there are some challenges in the way that we are doing this. I will briefly look at each in turn.

I start with the challenges that we are not going far enough, which have come from a number of noble Lords. The noble Baroness, Lady Stedman-Scott, and I have great respect for one another, but I say very gently that some of the critiques she has made of the Bill strike me as a little ironic, given that the last Government were in for 14 years and had all that time to take action. What did we get? We got one predecessor of one of these measures, which was put in at the fag end of the last Government and dropped into the other place after Committee, with none of the information that the noble Baroness is demanding from me—nothing at all, not even a requirement to produce a code of practice, never mind actually producing one, and absolutely none of the safeguards or protections. Now she is in opposition, I fully respect that it is the job of the Opposition to demand things of the Government, and she does a fine job of doing that. She also will not mind if, in turn, I occasionally throw back at her what her own Government failed to do. In this area, I think we are doing rather better.

Having got that off my chest, let us move on. It is worth saying that this Government are actually doing something. We committed to the biggest-ever savings package on fraud, error and debt at the Autumn Budget. Along with the Spring Statement, DWP fraud and error measures are estimated to achieve £9.6 billion of savings by 2029-30, of which up to £1.5 billion will be generated by this Bill. So this Bill is not all that we are doing, but it is an important thing that we are doing.

The noble Baroness, Lady Stedman-Scott, asked about cost. In the end, the costs of DWP working through these measures will be dependent on the munificence of the Treasury at the spending review, which I am not allowed to pre-empt. The impact assessment sets out our estimate and shows that around four times the benefit of every pound of our departmental spending will come back on scored measures to 2029-30.

On not doing enough, the noble Baroness asked about “sickfluencers”. She is right—it is the view of this department that we have the powers to deal with these crimes at the moment. We think the Bill will help the PSFA to do that at the same time. But, if she has ideas about other ways in which that could happen, I look forward to hearing them, along with her many other ideas for tackling fraud, which I have no doubt Committee will give us every opportunity to discuss.

While I am on the point, the noble Baronesses, Lady Kramer and Lady Stedman-Scott raised the question of whistleblowing. We absolutely agree; we want people to pass on information about fraudsters who are taking from our public services. We are open to keep looking at the best way to do that. We are working with partners such as Action Fraud to make it simple and easy for the public.

In the case of DWP, benefit fraud can be reported by the public online, by phone or by post—and, trust me, it is. But also, DWP staff have clear channels to report. On top of that, the PSFA will look into the possibility of being listed by the Department for Business and Trade as a body with which individuals can raise concerns around public sector fraud. That will help on that side.

While we are on the PSFA, concerns were raised by the noble Baroness, Lady Finn, the noble and learned Lord, Lord Garnier, and others about whether it is doing enough and about the scale. The PSFA’s enforcement unit is relatively new in what it does. The noble Baroness, Lady Finn, was a little a little bit harsh on test and learn. When the enforcement unit is as new as it is and will only with the passage of the Bill get the powers it needs to do any of these things, surely testing and learning is the right thing to do. If it can demonstrate clearly that results come from that, the possibility for scaling will be significant. I promise I am not making any assumptions of the Treasury.

The noble and learned Lord, Lord Garnier, asked whether the Government audit the work of the PSFA and whether the powers in the Bill will add anything. The PSFA publishes annual reports and has benefits audited by the Government Internal Audit Agency. Examples were given in my noble friend’s opening speech of where the PSFA currently cannot make the desired progress because it has not got the powers it needs. The Bill will give them to it.

That is, briefly, the case for not going far enough. Let us now do the going too far case. A number of noble Lords, including the noble Baroness, Lady Fox, to a degree, the noble and learned Lord, Lord Garnier, my noble friends Lord Davies and Lord Sikka, and the noble Lord, Lord Vaux, are concerned about possible infringements on the right to privacy or other aspects of the reach of the Bill. I am grateful to the noble Lord, Lord Vaux, for acknowledging the improvements made by the Bill. I raised a number of reservations when the last Government introduced their third-party data measure, because I felt that the powers were simply not proportionate and that there were not enough safeguards around them.

While I am here, I say to my noble friend Lord Davies that the fact that that we provide safeguards does not mean the powers are wrong. That is what safeguards are for. There are safeguards in all aspects of life. I will come back to that. It means that we want to be transparent and show people that powers the state is taking are used appropriately. That is what they are for. The noble Lord explained the limitations.

We are now limiting the benefits in scope. For all the measures there will be clear limits about what information can be requested, for what purpose, and how the PSFA and DWP will use it. That is all new, and the Bill introduces considerable oversight and reporting requirements.

I believe the Bill strikes the right balance and, in answer to my noble friend Lord Sikka, I am confident that it is complying with the Government’s duties under the ECHR. The Government’s detailed analysis on compatibility is set out in the published ECHR memorandum.

I need to take on a couple of noble Lords who have suggested that this is a sort of broad trawling expedition. It has been described as DWP going out there and trying to have access to everybody’s bank accounts—suspicion-snooping. That is a simple misunderstanding of the nature of the powers. Let me try to explain why. DWP will not be given access to people’s bank accounts by this measure, which is about banks being asked to examine their own data, which they already have and can already look at. They have been asked to provide DWP with the minimum amount of information necessary to highlight whether there is a possibility that someone may not be meeting a specific eligibility rule for a specific benefit. At the point the information is shared with DWP, no one is suspected of having done anything wrong. The presumption of innocence is still there.

[Baroness Fox of Buckley (Non-Afl)]

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

[Baroness Sherlock (Lab)]

I have heard accounts of people saying that disabled people will worry that DWP will know that they go to Pret and therefore cannot really need the money, et cetera, so it is important to make it clear that DWP will not have access to their bank accounts through this EVM.

DWP knows the bank accounts into which benefits are paid, so DWP will tell the banks to look specifically at the bank accounts into which those benefits are paid. It will tell them specifically the criteria they are looking for, and all they are being asked to provide is enough information to identify accounts which may, on the face of it, be in breach. Then, that information will be used along with other information that DWP holds, and it will be examined by—to reassure the right reverend Prelate the Bishop of Lichfield—a human being, who will make a decision on whether to investigate. There could be a number of outcomes. The outcome could be that the person may have had, for example, more money in their account than the benefit allows, but for one of the many acceptable reasons. There could be a perfectly good reason. The person may have made a genuine error, and that will be dealt with in a different way, or in some cases there may be evidence of fraud, and that might move into a fraud investigation.

I accept that some noble Lords may not think this proportionate. We believe it is proportionate, with those safeguards wrapped around it, but I want to be clear that we are arguing about the same thing, not about different understandings of what is going on at the time.

[Lord Davies of Brixton (Lab)]

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

[Baroness Sherlock (Lab)]

This may be a matter that we might more usefully explore in Committee, but I shall give my noble friend a simple example. There are certain compensation payments that are not taken into account in terms of eligibility for benefits. They are excluded from the capital limits. So it may be that somebody has received a compensation payment. There is guidance about circumstances in which people may have money in their account. The point is that cases will be looked at individually before they are pursued. There is a requirement on fraud investigators to look at all information and chase down all avenues of information, so they will do that and make an appropriate decision.

Just to be clear, on benefits in scope, the initial use of the power is focused on three benefits: universal credit, employment support allowance and pension credit. The reason why is that that is where the highest levels of fraud are at the moment. The noble Lord, Lord Palmer, will have noticed that carer’s allowance is not on the list for the EVM. The two types of fraud and error we are targeting initially—breaches of capital and the living abroad rules—are significant drivers of fraud and error in those benefits. For universal credit, nearly £1 billion was overpaid last year as a result of capital-related fraud. Once fully rolled out, that measure alone will save £500 million a year. The state pension is expressly out of scope and cannot be added even by regulations, and that is sensible given that the rate of state pension overpayment is just 0.1%.

Somebody asked me whether we plan to add any other benefits. The answer is no. We cannot rule them out because fraud may change in the future and different benefits may be subject to different levels of fraud.

A number of noble Lords, including the noble Lord, Lord Vaux, the right reverend Prelate the Bishop of Lichfield and the noble Baroness, Lady Stedman-Scott, raised the use of AI and automated decision-making. To be clear, we are not introducing any new use of automated-decision making in the Bill, so no such new use will happen as a result of it. The DWP and the PSFA will always look at all available information before making key decisions about the next steps in fraud investigations or inquiries into error. Fraud and error decisions that affect benefit entitlement will be taken by a DWP colleague, and any signals of potential fraud or error will be looked at comprehensively.

Given the arguments made by those who think we are not going far enough, and by those who think we are going too far, we appear to be Goldilocks in this. I think we have got the balance right now. Goldilocks is not always right, I accept that, but I think we have landed in the right place because of the safeguards the Bill includes to ensure that its measures are effective and proportionate. Those safeguards provide protection but also accountability and transparency.

I will not go back over all the different kinds of oversight, but on the appointment process, I assure the House that the process for the independent people who will oversee EVM and the PSFA’s measures will be carried out under the guidance of the Commissioner for Public Appointments and will abide by the Governance Code on Public Appointments throughout.

I am grateful for my noble friend Lady Alexander’s compliments. I would suggest that she herself apply, but she might not qualify for the independence threshold entirely, as one might hope.

I shall say a brief word on safeguards. The Bill includes new rights of review and appeal. The DWP will still provide routes for mandatory reconsideration of decisions relating to overpayment investigations, followed by the opportunity to appeal to the First-tier Tribunal. For direct deduction orders, again, there are new routes for representation and review, followed by appeal to the First-tier Tribunal, while the court’s decision in relation to a disqualification order can be appealed on a point of law.

On driving licences, I take the point made by my noble friend Lord Sikka: why driving licences and not membership of a political party? I hate to break it him, but it is just possible that not being allowed to join a political party does not have the same deterrent effect as losing a driving licence—not for us, obviously, but we are not typical, although it is touch and go. I assure the House that this measure has been used for a long time in the Child Maintenance Service. As the noble Baroness, Lady Stedman-Scott, said, its effectiveness is shown in that it almost never needs to be used.

As a final reminder, this is about debt recovery. It is about people who, by definition, are not on benefits and not in paid employment. The reality is that if you owe DWP money and you are on benefits, the DWP can already deduct it from your benefits, and if you get a wage packet the DWP can deduct it from your wages. However, if you are none of those things—if you are privately wealthy, self-employed or paid through a company—and you owe the DWP money, the department does not have the same ability to go after that money as it does for those who are on benefits or in PAYE. The Bill gives the department the opportunity to use measures such as deduction orders and other tools to try to bring people to the table. If someone comes to the table to have a conversation, we will begin to arrange a payment plan. The other measures are there only if people refuse to engage and simply will not come along and do what they ought to do.

[Lord Sikka (Lab)]

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

--- Later in debate ---

[Baroness Sherlock (Lab)]

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

[Noble Lords]

Keep going!

[Baroness Sherlock (Lab)]

I will keep going for a bit.

A number of noble Lords asked whether the banks want to engage. We have been engaging very much with the banks. Meetings have been held by the DWP and Cabinet Office Ministers, some of which I have attended, with senior representatives of the finance industry, including UK Finance, individual banks, building societies and the FCA, and we continue to work closely with banks on the design and implementation of the relevant measures. We have set out the expected cost to banks where possible, and an impact assessment of the business costs of the EVM will follow, but that will depend on how the measure is designed and the way in which it will work.

On potential conflict with financial crime duties—this is important—the Government are working closely with UK Finance and the FCA to make sure the measures align appropriately with wider financial crime duties. That includes work on the development of the PSFA’s guidance and the DWP’s codes of practice for debt recovery and the EVM. We will make sure that works appropriately.

I think I am running out of time, but I will just say a word on carers. I absolutely agree with the noble Lords, Lord Vaux and Lord Palmer, and the noble Baroness, Lady Kramer, who mentioned the important contributions of carers. This Government are absolutely behind carers. We introduced the largest ever increase to the earnings limit in carer’s allowance. Crucially, this Government introduced a review. We commissioned Liz Sayce to lead an independent review into earnings-related overpayments of carer’s allowance. The review is expected to reach its conclusions this summer and we are looking forward to learning from that to make sure that any learning can be fed back into the way the department works.

Finally, I will say a word on safeguarding. I am sorry to say I have forgotten which noble Lord mentioned that the DWP Select Committee put a report out on this subject. We will look at it very carefully and, obviously, take close account of its recommendations. Long before that happened, we put out our Green Paper, Pathways to Work. The Secretary of State is very keen to make sure the DWP gets safeguarding right. We committed in that Green Paper to introducing a new department-wide safeguarding approach. It will be a very significant departure from the way things are done. We are going to work with stakeholders and consult to make sure we get that right.

To reassure noble Lords, the DWP looks carefully all the time at how we support vulnerable people. Decisions are taken individually and that is taken into account. Of course mistakes will be made on occasions, but as a department we place a huge store on making sure we understand the circumstances people are in and support then when they need help, and try to find the best way through for each individual.

[Lord Davies of Brixton (Lab)]

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

[Baroness Sherlock (Lab)]

I have a wodge of answers to questions asked by a lot of noble Lords, and I am afraid time has run out. But to be clear, we need to not ally fraud and error. This is just a data pull. If data comes from the banks to the DWP, it will be used with other data to make an individual assessment of someone’s position and appropriate decisions will be made at that point about how to deal with it. It may be an overpayment, a genuine mistake, an act of fraud, or there may be no problem. Cases will be looked at individually.

This Bill delivers on our manifesto commitment. It is expected to save £1.5 billion over the next five years as part of wider action at the DWP to save a total of £9.6 billion. The Bill will bring in new powers for the PSFA to tackle fraud and it will deliver the biggest upgrade to the DWP’s counterfraud powers in over 14 years. We believe it is proportionate and demonstrates that we will take action against those who willingly defraud our public services, providing the right tools so that we can step up to prevent, detect and deter criminal activity. I very much look forward to working with so many noble Lords across the House—it says here—during the passage of this important Bill. I look forward to seeing many of them in Committee. I beg to move.

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