Public Authorities (Fraud, Error and Recovery) Bill

Debate between Baroness Anderson of Stoke-on-Trent and Lord Vaux of Harrowden

Committee stage
Wednesday 11th June 2025 Grand Committee

[Baroness Anderson of Stoke-on-Trent (Lab)]

My Lords, all these amendments pertain to deduction from earnings orders—or DEOs, as I shall refer to them from here. DEOs are a mechanism by which the PSFA can instruct an employer to make deductions from the liable person’s salary in order to recover the money owed as a result of fraud or error. This power can be exercised only after the amount owed has been agreed by the liable person, a court or tribunal, or if the penalty appeal period has lapsed or an appeal has been finally determined. People can avoid their employers being contacted if they simply engage with us and pay what they owe.

DEOs are an established mechanism used by the courts, the DWP, the Child Maintenance Service and some local authorities. We have sought to emulate best practice and established processes to make it straightforward for the employers that have to implement them. There are safeguards for the liable person, such as a protected earnings amount of 60% and the requirement for deductions to be affordable and fair, as set out in Clause 41.

Before an order is made, the liable person will have the opportunity to make representation on the proposed terms. Amendment 61C would create an obligation for the PSFA to provide the reasoning behind its decision to proceed with a DEO following these representations. Amendment 61D would create a similar obligation for the PSFA to demonstrate that it has taken the liable person’s wider circumstances into account when determining the level of affordable and fair deductions. Both these amendments are duplicative as the PSFA would be doing this anyway, as a matter of good public law. As I outlined previously, guidance will also be published detailing what information will be supplied to the liable person as part of the wider decision-making processes.

Amendment 61E would limit the regulation-making powers in Clause 41(7) to establishing affordability considerations. We have striven to put as much detail into the Bill as possible, but there are elements where it is valuable to have a degree of flexibility so that further conditions or restrictions can be added to the measures to reflect wider societal, economic and technological changes. This amendment would severely limit the Government’s ability to adapt to these changes and impact the efficacy of this recovery method, thus potentially reducing the money lost to fraud that could be recovered in the future.

Amendment 61F would require that the PSFA consults with employers on the level of admin costs that they can charge the liable person for implementing a DEO. There are standard charges of £1 per deduction period allowed by the courts and other organisations that use DEOs. It is not for the PSFA to set up a different regime single-handedly, as it will be following established processes already used across government. If it is felt that changes to this charge should be made, they would need to be done in conjunction with the other bodies.

Amendments 62A and 62B would prevent a suspended DEO from being restarted after 24 months. We discussed the same matter on Monday, in relation to direct deduction orders. I confirm that I am still reflecting on the points raised by the noble Baronesses, Lady Fox and Lady Finn, and the noble Lord, Lord Vaux, which also apply to DEOs, and I am having meetings with officials on them. It is important that the PSFA has discretion in how it can react to individual circumstances counterbalanced against its duty to recover money lost to fraud and error in the most appropriate way. There is a balance to be struck and I shall report back on my reflections in due course.

Finally, Amendment 62C would require that, when the PSFA revokes a DEO, it provides the reasoning to both the liable person and their employer. In practice, this would be shared with the liable person as a matter of good public law to safeguard the public law duty of fairness in decision-making for the individuals subject to the orders. However, there are serious privacy considerations that could be undermined by providing such information to the employer. Upon the establishment of a DEO, the employer is not told anything about the DEO other than what is to be deducted from the liable person’s salary. This is the only information of relevance to the employer. Any other information would be a breach of privacy.

Regarding some of the other points raised, particularly by the noble Baroness, Lady Finn, I think it would be helpful to your Lordships if I assist them with some more information on safeguards. Regarding the safeguards in place for the use of DEOs, including preventing hardship, the Public Sector Fraud Authority has committed to the following safeguards: vulnerability assessments, maximum deduction amounts, opportunities for representation, reviews and appeals, and the ability to notify a change of circumstances. The PSFA will continue to utilise best practice from across government.

On the question of who determines the amount of debt owed, the Public Sector Fraud Authority’s investigation will calculate the debt owed to the Government as a result of fraud or error following an investigation into suspected fraud. The liable person will be notified of the recoverable amount. If they do not agree, a firm and final determination will be sought by a court or tribunal.

The noble Baroness, Lady Finn, asked what is meant by “among other things” in Clause 41. Clause 41(6) gives the Minister powers to

“make further provision about the calculation of amounts to be deducted”

in respect of DEOs. To be clear, to make further provision would not allow the Minister to qualify or change the provision, only to add specific conditions or restrictions that can be taken into account when calculating the amount to be deducted. As given as an example in Clause 41(7), the key consideration will be hardship and defining what constitutes hardship. It is important that the definition of hardship is not fixed, as what constitutes hardship today may look very different in, say, 10 years’ time.

The term “among other things” could also include other items that can be taken into account when calculating DEOs that are not so immediately obvious. For example, the regulations could be used in allowing for a different deduction rate around the Christmas period, when the liable person might have other outgoings that would not be reasonably foreseeable when the order was first given.

I hope that goes some way to assuring noble Lords about our safeguards and that the noble Baroness will feel able to withdraw her amendment.

[Lord Vaux of Harrowden (CB)]

My Lords, I listened to the Minister, and I listened to her the other day on the same subjects regarding DDOs. A question occurs. In many cases, the amount owed is set by the court. Why, then, does the court not decide how that amount should be repaid? Why do we have to go through all these processes and decisions by the departments rather than the court?

[Baroness Anderson of Stoke-on-Trent (Lab)]

The noble Lord makes a very interesting point, on which I will have to reflect and come back to him, if that is okay.

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[Baroness Anderson of Stoke-on-Trent]

The noble Baroness will be very aware that we now have several days of Committee before us on stage 2 of the Bill, and I look forward to discussing this and many issues with her as the Committee stage progresses.

[Lord Vaux of Harrowden (CB)]

My Lords, I thank all noble Lords who have taken part in this short but informative debate. I seem to be getting a bit of a track record. I thought my previous record was managing to get an amendment signed by both the noble Baroness, Lady Bennett, and the noble Baroness, Lady Noakes. I might even have surpassed that with this one. I am not sure quite what that says.

I am partially reassured by what the Minister has said, and obviously I am sure that she and her team will follow the safeguards that she has talked about. But those safeguards are not in statutes. For example, she talked about decisions being taken only by humans in relation to putting out information requests. That is not the case. The code of conduct refers only to decisions that will affect benefits, not the information request side of things, and it is only in the code of conduct, which can be changed at will. I am uncomfortable here.

We are talking, particularly with the eligibility verification process, about very large amounts of data, potentially on 9.9 million people. Who knows how many will flag up eligibility indicators? But without a shadow of doubt, the department will be using some form of algorithmic or AI tool to decide which of those are the ones the department wants to concentrate on. If that is the case, that is where the bias can creep in. If bias creeps into the algorithm or the machine learning tool and comes up to a person, it is easy to say “computer said yes” or “computer said no” and not to question the data coming to you.

I am not totally comfortable that there really are the safeguards at the moment. We are going to come to the human interaction at a later stage of the debate, so I will not go further into that. To be honest, I suspect that the Netherlands, Sweden and Australia probably had similar safeguards. They did not work. I cannot say for certain, but most departments believe that they are doing the right thing and that the safeguards are working. But they did not in those cases, and real problems were caused to vulnerable people.

I will withdraw the amendment but this is something that we will definitely come back to. Just in passing, I also welcome the noble Viscount, Lord Younger, to the right side of the fence with us. I beg leave to withdraw the amendment.

Public Authorities (Fraud, Error and Recovery) Bill

Debate between Baroness Anderson of Stoke-on-Trent and Lord Vaux of Harrowden

Committee stage
Monday 9th June 2025 Grand Committee

[Lord Vaux of Harrowden (CB)]

The noble Baroness mentioned a moment ago that a direct deduction order can be made only when a person has already agreed that an amount is recoverable. Could she point out where that is in the Bill? I cannot find it anywhere.

[Baroness Anderson of Stoke-on-Trent (Lab)]

My Lords, I am assured that it is in the Bill. I ask noble Lords to bear with; as soon as that has been passed to me, I will highlight exactly where in the Bill it is.

It is in Clause 12. That was like magic.

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[Baroness Anderson of Stoke-on-Trent (Lab)]

I thank the noble Viscount for giving me the opportunity to reassure him that, yes, it can and it will.

[Lord Vaux of Harrowden (CB)]

On Amendment 55, I understand that 24 months may not be the right number, but it cannot be right that an order can stay open indefinitely so that, 10 or 15 years later, the PSFA can suddenly start taking money from the account again. There must be some sort of drop-dead point; I wonder where that should sit.

[Baroness Anderson of Stoke-on-Trent (Lab)]

I beg the leave of the Committee to consider that; I will reflect on it and come back in due course.

Public Authorities (Fraud, Error and Recovery) Bill

Debate between Baroness Anderson of Stoke-on-Trent and Lord Vaux of Harrowden

Committee stage
Wednesday 4th June 2025 Grand Committee

[Baroness Anderson of Stoke-on-Trent (Lab)]

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.

[Lord Vaux of Harrowden (CB)]

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 ?

[Baroness Anderson of Stoke-on-Trent (Lab)]

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.

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[Baroness Anderson of Stoke-on-Trent (Lab)]

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.

[Lord Vaux of Harrowden (CB)]

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.

[Baroness Anderson of Stoke-on-Trent (Lab)]

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.

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[Lord Vaux of Harrowden (CB)]

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.

[Baroness Anderson of Stoke-on-Trent (Lab)]

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.

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[Lord Vaux of Harrowden (CB)]

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?

[Baroness Anderson of Stoke-on-Trent (Lab)]

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.