Public Authorities (Fraud, Error and Recovery) Bill
Debate between Baroness Finn and Lord Maude of Horsham
Baroness Finn (Con)
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.
Lord Maude of Horsham (Con)
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.