Public Authorities (Fraud, Error and Recovery) Bill
Baroness Sherlock ExcerptsWednesday 18th June 2025
(5 days, 9 hours ago)
Grand CommitteeRead Full debate Public Authorities (Fraud, Error and Recovery) Bill 2024-26 View all Public Authorities (Fraud, Error and Recovery) Bill 2024-26 Debates Read Hansard Text Read Debate Ministerial Extracts Amendment Paper: HL Bill 96-I(a) Amendments for Grand Committee (Supplementary to the Marshalled List) - (3 Jun 2025)
Viscount Younger of Leckie (Con)
My Lords, I also wish to be brief and will cut down my notes, but this is a good opportunity to raise a number of points. I am very pleased that the noble Lord, Lord Vaux, has spoken to Amendments 92 and 93, as supported, or added to, by the noble Lord, Lord Palmer.
I share the principle that underpins Amendment 92 in the name of the noble Lord, Lord Sikka—that the powers of entry, search and seizure provided for in Clause 76 must be exercised responsibly and proportionately, with proper regard for the rights of individuals. However, my main point here is that, while the amendment aims to provide a safeguard by requiring investigators to be accompanied by a police officer when exercising these powers, I suggest that we need to balance that safeguard with a degree of practicality. If the use of these powers is deemed serious enough to require a police presence, one might reasonably ask an obvious question: why would the police not simply carry out the action themselves, under existing powers—I think that was the point that the noble Lord, Lord Vaux, made—rather than acting in an accompanying or supporting role? If these powers are to be used more routinely—for example, to support the investigation of lower-level but still costly fraud—do we risk placing a significant administrative and resource burden on our already overstretched police forces? I could say more on this, but I will not.
Amendment 93, also in the name of the noble Lord, Lord Sikka, seeks to insert an additional layer of judicial oversight into the appointment of authorised investigators by requiring that their authorisation is subject to court approval, rather than left solely to the discretion of the Secretary of State. Without going into the detail, I support the principle behind this amendment.
I will conclude by asking some questions of the Minister on process, which has been a consistent theme on this side in our previous four days in Committee. I am not expecting answers now; it is really to put down the questions along the themes that I have just spoken to. We have had some verbal reassurance from the Government that these powers will be used against property and not people. I am not quite sure how reasonable force can be applied against property but, more than this, it is clear from the text of the Bill that this is not legally guaranteed. Reasonable force could be wielded against people by DWP officers; I hope that the Government can provide more clarity on the balance of that. Can the Minister confirm that these powers could in fact be used against people, as well as property? That is quite an important point. Again, the argument is about whether the police or the DWP may be required. In addition, can she give us some more information as to why she believes these powers need to be granted to civil servants in the DWP?
I say again that the police are the recognised authority, who have legitimacy, in the eyes of the public, to exercise and apply PACE powers. I feel that the Government have a duty to defend, quite strongly, why they want to grant these sweeping powers to members of a government department such as the DWP. We have a police service for a reason: officers are trained, regulated and experienced in using these powers appropriately. If fraud is suspected, particularly at a serious level, is it not right that it should be investigated by the police and not delegated to civil servants?
My concluding comment is that we should be cautious about expanding investigatory powers without a clear and compelling case. My final question to the Minister is: what justification is there for bypassing the police? That plays into my main question, which is: whither the police and whither the DWP?
The Minister of State, Department for Work and Pensions (Baroness Sherlock) (Lab)
My Lords, I thank noble Lords for their comments and questions. I will speak first to Amendment 92. The amendment would undermine the policy intent of this part of the Bill, so we cannot accept it. The DWP leads investigations into social security matters and, as a result, our staff are better positioned to search for items relevant to these investigations—the things that they deal with, such as benefit claim packs or documents related to fraudulent identities. Requiring the police to be present for all DWP search and seizure activity, including investigative tasks related to securing criminal evidence, would erode the anticipated obvious benefits of the measure to both the DWP and the police. Crucially, it would divert the police away from focusing on the crime within our communities that only they can deal with and dealing with the human victims of those crimes.
These powers allow the DWP to apply to a court for warrants to enter a premises, conduct search and seizure and apply for and exercise production orders, with or without the police present. That clarifies the point made by the noble Lord, Lord Vaux. They provide the DWP with greater control over its own operations and ensure that police time is not spent undertaking administrative tasks on the DWP’s behalf.
However, I reassure the Committee that safeguards are in place to govern the use of these powers. First and foremost, court approval must be granted for all warrants. The requirements for a DWP warrant application will be as strict as those for a police warrant application. Furthermore, the DWP intends to exercise these powers exclusively in cases involving serious and organised crime. This is not novel. Similar powers are already being used by HMRC, the Food Standards Agency and the Gangmasters and Labour Abuse Authority, which can undertake search and seizure activity without needing to be accompanied by the police.
Amendment 93 would impose unique obligations on the courts that they do not face in respect of other government departments with similar powers. PACE powers do not require the individual exercising them to be appointed by the court and there is no clear reason for the DWP to be any different. DWP-authorised investigators, like others who exercise PACE powers, will be subject to the PACE code of practice relating to search and seizure activity and will be required to follow the same procedures and processes as the police when submitting a warrant application to the court. These are not standards set by the DWP; they are set out in PACE, which all bodies exercising these kinds of law enforcement powers must adhere to. Specialist training must be successfully completed before authorisation is given and only then can an authorised investigator exercise these powers on behalf of the Secretary of State. That approach ensures that the correct responsibilities are attributed to the Secretary of State and the courts.
On the question relating to the PSFA, I am advised that it is not that a constable necessarily has to be present, but somebody with those powers, who may not be a police officer but could be from the National Crime Agency, the Serious Fraud Office, et cetera. As I said, the police do not always have to be there, if it is not necessary. There will be occasions when it will be necessary. For example, the previous Government published a fraud plan in which they recommended that powers of not only search and seizure but arrest be taken. We have decided not to take those powers, so if there needed to be an arrest, we would need to have police officers with us. If there were a risk of serious violence, again, the police would need to be present, but not otherwise.
On the question of force, the provisions set out in Clause 76 provide powers under PACE to enable DWP serious and organised crime investigators to apply for a search warrant to enter a premises, search it and seize items, with or without police involvement in England and Wales. The clause also enables authorised investigators to apply to a judge for an order requiring an individual suspected of social security fraud to provide certain types of sensitive information when relevant to the criminal investigation. It also provides for the use of reasonable force to conduct a search, such as breaking open a locked filing cabinet to search for materials. The clause provides that these powers can be used by an authorised investigator who is authorised by the Secretary of State.
To be clear, a warrant provides for the powers that can be deployed when that warrant is exercised. Our authorised investigators in DWP will not use reasonable force against people, although they may use it against property, such as breaking open a locked filing cabinet to retrieve a laptop or other evidence. However, the reason it has to be here is that, when the DWP applies for a warrant, that warrant must cover any activities that may need to be undertaken by either the DWP or the police, so although our investigators will not use reasonable force against people, it may be necessary for the police to do so when they are accompanying the DWP. That is why the legislation is drafted that way. If it were not, police out there on our warrant would not be able to use reasonable force and there may be occasions on which they need to do so. I hope that that clarifies matters for the noble Lord.
Lord Vaux of Harrowden (CB)
Can the Minister explain why the DWP needs that power but the PSFA does not? The two clauses in the Bill are otherwise identical and differ only in respect of the reasonable force element. If the PSFA does not need it, I do not understand why the DWP does.
Baroness Sherlock (Lab)
The expectation is that we will be dealing with different kinds of crime. We are talking about serious and organised crime, where we will go out looking for evidence. We believe we do need these powers. If there is another argument behind that I am happy to write to the noble Lord. I have explained why the DWP needs them, and we clearly do need them in these circumstances because without them we could not conduct this work. The DWP has lots of experience because we already do this work; the police just have to go out with us, to be there and to do the searching. So we know what we need and therefore we know that we need these powers. If there is anything else I can add on the PSFA, I will write to the noble Lord.
Viscount Younger of Leckie (Con)
The Minister may have just answered my question, which is a slightly opaque one, perhaps. Is it a good assumption that in any search of a property by the DWP when it suspects fraud, members of the DWP will always go prepared with the necessary back-up, including the police or members of the NCA, if they suspect it is going to be a challenging search—or is that wrong?
Baroness Sherlock (Lab)
As I said, the police might need to be present if we felt there was a risk of any serious violence. If it was felt there might be a need for arrests or, as the noble Viscount has suggested, there was a possible risk of violence, the police would be asked to accompany DWP officers. I have given those assurances, so I hope the noble Lord will withdraw the amendment.
Lord Vaux of Harrowden (CB)
My Lords, I thank everyone who has taken part in this short but, I hope, illuminating debate. I have concerns about these police powers being given to civil servants and I do not think I am alone in that respect. I am comforted, to some extent, by the fact that these will be used only in the cases of serious and organised crime. I wonder whether the solution, therefore, is to put that in the Bill and put that safeguard in place, because I think that would comfort most people who have the concerns that we have. Perhaps that is something that the Minister might be willing to discuss between now and Report. That said, I beg leave to withdraw the amendment.
Baroness Sherlock
Member’s explanatory statement
See the explanatory statement for my amendment to Schedule 4, page 101, line 15.
Baroness Sherlock (Lab)
My Lords, government Amendments 94 to 97 are minor and technical in nature. In England and Wales, the common law does not permit access to material protected by legal professional privilege under any circumstances. However, relying on this common-law exclusion would not extend to Scotland. In addition, a different definition of legal privilege applies in Scotland. To ensure that the original intent is maintained, this position is now set out in a single provision within new Schedule 3ZD.
These amendments make it explicit that if the information being sought relates to personal records which involve confidentiality of communications that could be maintained in legal proceedings in Scotland, it cannot be seized, copied or obtained, et cetera. This ensures that the same protections for information of this type apply in Scotland as they would in England and Wales. I hope that these amendments are clear and I beg to move.
Lord Palmer of Childs Hill (LD)
My Lords, as we turn to government Amendments 94 to 97, I wonder, as I always do when there are lots of government amendments to their own Bill, whether enough thought has gone into it in the other place.
I know that these proposals are primarily technical, with the key aim of simplifying the drafting of new Schedule 3ZD to the Social Security Administration Act 1992. Government Amendment 96 introduces a single clear prohibition on the seizure or examination of information of legal privilege. This streamlining could help to clarify the legal position for both investigators and those subject to investigation, ensuring that the Bill’s provisions are easier to interpret and apply in practice.
Clarity in legislation is always desirable, especially in complex areas such as fraud investigation, where the rights of individuals and the needs of public authorities must be carefully balanced. At the same time, it is important to consider how these amendments interact with the Bill’s wider objectives of safeguarding public money and equipping authorities with the tools needed to tackle fraud and error effectively. Ensuring that information which is subject to legal privilege is properly protected is a long-standing principle within our legal system. These amendments appear to reaffirm that commitment without substantially altering the Bill’s intent. I have no problem in agreeing with what should have been in the Bill at the beginning.
Viscount Younger of Leckie (Con)
My Lords, my remarks largely chime with those made by the noble Lord, Lord Palmer. The Committee will be relieved to know that this is my shortest speech. I offer some measured support for these amendments. They address the important principle of the protection of legally privileged material, and in a way that simplifies and clarifies the drafting of this part of the Bill.
The right to legal professional privilege is, of course, a cornerstone of our justice system. That principle should be unambiguous in legislation of this kind. These amendments seek to express that safeguard more clearly through a single consolidated position. There is certainly merit in that. A simplified and consolidated statement of the limitation on investigatory powers in respect of privileged material is likely to be easier to apply in practice and could reduce the risk of inadvertent overreach.
Baroness Sherlock (Lab)
My Lords, I am grateful for the support and take the chiding in the spirit in which noble Lords intended it.
Government amendments are a key part of the legislative process. Noble Lords will have seen them from time to time, allowing for the refinement and improvement of Bills as they move through Parliament. It is critical that the Bill’s provisions comply with the distinct legal jurisdiction of Scotland. Every effort has been made to ensure that this is the case. We have worked closely with the Office of the Advocate-General for Scotland and with officials in the Scottish Government.
Following an additional review of the Bill prior to Committee, the Office of the Advocate-General for Scotland identified the need for a minor amendment to ensure that the powers would operate in Scotland as intended. We felt it was important to make the law clear in the Bill. I am grateful for noble Lords’ grace on this.
Baroness Sherlock
Member’s explanatory statement
See the explanatory statement for my amendment to Schedule 4, page 101, line 15.
Baroness Sherlock
Member’s explanatory statement
This amendment and my other amendment to clause 85 remove unnecessary references to a payment or credit, both of which are within the relevant definition of “benefit” already as a result of section 121DA(5) of the Social Security Administration Act 1992.
Lord Palmer of Childs Hill (LD)
My Lords, as we consider Amendments 99A, 99B and 99C, spoken to by the noble Baroness, Lady Finn, it is clear that these proposals are focused on the mechanisms of independent review and oversight within the Bill. Amendment 99A would ensure that the Secretary of State cannot limit the independent person’s review to only certain timeframes, thereby supporting the principle of comprehensive and impartial scrutiny. Amendment 99B would require the Secretary of State to provide information to the independent person for the purposes of a review, which could strengthen the independence and effectiveness of the review process. Amendment 99C would compel the Secretary of State to appoint independent reviewers not just in England but also in Wales and Scotland, ensuring a degree of consistency and regional representation in oversight arrangements.
These amendments appear to reinforce the Bill’s commitment to robust oversight and transparency, aligning with the existing provisions for independent inspection and review already outlined in the legislation. At the same time, it will be important to consider whether these changes might introduce additional administrative complexity or affect the flexibility of the Secretary of State to respond to evolving circumstances. As ever, the challenge is to strike the right balance between effective oversight and operational efficiency. I look forward to hearing the views of the noble Baroness, Lady Sherlock, on whether these proposals best serve the aims of accountability and good governance within the framework of this Bill. It is amazing what changing the word from “may” to “must” can do, but it can make a big difference and I wait to hear the Minister’s reply.
Baroness Sherlock (Lab)
My Lords, I am grateful for the contributions to this short debate. I hope that I can answer the questions that have been raised.
The first and most important piece of information is to remind the Committee that in the Commons my honourable friend the Minister for Transformation made it clear that His Majesty’s Inspectorate of Constabulary and Fire and Rescue Services will be commissioned to inspect the DWP’s criminal investigation powers for England and Wales and HMICS for Scotland. I hope that that is helpful. I can reassure the noble Baroness, Lady Finn, that the reason why we chose HMIC is that for more than 160 years it has been carrying out independent scrutiny of law enforcement in England and Wales, including the police. There is no danger whatever that it will be any kind of box-ticking exercise, if HMIC is doing it. I am sure that she can be reassured on that front.
I hope that that shows the level of commitment that we have to the level of scrutiny. If we want to do it properly, HMIC is the body to scrutinise powers of this seriousness. But we have worked closely with HMICFRS and HMICS. We intend to operate in the same way as other law enforcement agencies that are subject to inspections by those bodies. What will happen is that, prior to each inspection, the DWP and the inspectorate body will mutually agree the period that the inspection will cover. That is to make sure that the inspection can cover all necessary activity that has been undertaken, which is a common way of operating. We have no reason to believe that it will not operate well in this case.
We understand that sharing information is essential and will obviously not seek to misrepresent or hold back any relevant information. The legislation as drafted allows us to share all relevant information. But it is essential that the Secretary of State retains discretion—for example, being able to choose not to provide information that may be particularly sensitive and where sharing it could have a detrimental impact, such as on the outcome of an active case. The DWP will fully support and co-operate with the inspection bodies and its reports will make clear if we did not do that. But we want to do so, to make sure that we can deliver on these powers to the right standard.
I am grateful to the noble Lord, Lord Vaux, for answering one question for me. There will indeed be inspectorates. HMICFRS will cover England and Wales and HMIC will cover Scotland to enable us to have a different reviewer in the two places. I hope that, given those reassurances, the noble Baroness, Lady Finn, will not press her amendments.
Baroness Finn (Con)
My Lords, I thank the Minister for her reply. As we draw this debate to a close, I return to the fact that these amendments are rooted in the core values of fairness, transparency, independence and accountability. I thank the noble Lords, Lord Vaux and Lord Palmer, for their support, although I know that the noble Lord, Lord Vaux, has not supported Amendment 99C.
The independent review mechanism outlined in Clause 88 should be one of the central safeguards of the Bill. It should ensure that the powers conferred are used proportionately, effectively and in the public interest. As it currently stands, that mechanism risks being weakened by loopholes and discretionary clauses that leave too much power in ministerial hands. I note the response about HMIC, but it still goes to the core that we want this Bill as a standalone and that those loopholes are necessarily closed.
Amendment 99A speaks to a fundamental concern: the right of the Government to define the terms of their own scrutiny. That is not a mark of confident democracy. A review that can only examine certain timeframes selected by the very people being reviewed is not a genuine safeguard; it is a managed narrative. True independence means giving the reviewer the authority to follow the evidence wherever it leads, not wherever the Secretary of State allows.
Amendment 99B is in many ways even more foundational. What is the value of appointing an independent person if that individual can be denied access to the very information that they need to do their job? We cannot have effective oversight if it depends on the good will of the department being examined. I take note of what the noble Lord, Lord Palmer, said. There is a huge difference, as I know well from my own time in government, between the words “may” and “must”. “Must” is a minimal expectation if we are to uphold the principles of openness and integrity. Anything less risks turning independence into theatre and accountability into a form without substance.
Amendment 99C is about consistency. I appreciate that the noble Lord, Lord Vaux, considers it unnecessary. However, if fraud knows no borders between England, Wales and Scotland, neither should scrutiny. We cannot rely only on the Secretary of State’s discretion to decide whether an independent review happens in one nation but not another, because that creates potential confusion and disparity and the appearance, if not the reality, of selective transparency. This is a probing amendment and I appreciate what has been said, which I will pick up on later. What we are aiming for is a duty to appoint independent reviewers across the devolved nations so that trust is not patchy but uniform across the United Kingdom.
When taken together, these amendments must represent a clear and coherent vision that government power must be matched by government accountability. That review must be more than just process. It must be meaningful, showing that we do not fear scrutiny but welcome it, because it is through scrutiny that public trust is earned and retained. The Government have rightly set out to tackle fraud and protect public money, but if the public are to believe that this effort is both rigorous and fair, the checks that we place on those powers must be equally robust. These amendments deliver that balance, not to obstruct but to uphold the values that any confident, responsible Government should share. I urge the Minister to consider the purpose and principle that these amendments seek to preserve. Let us not pass up the opportunity to make this legislation stronger, fairer and more trustworthy. I beg leave to withdraw the amendment.
Lord Palmer of Childs Hill (LD)
My Lords, I am pleased in this instance to express my strong support for Amendments 99D and Amendment 109ZA, tabled by the noble Viscount, Lord Younger, and the noble Baroness, Lady Finn. I have not been quite so firm in my support for others, but Amendment 99D would ensure that, before any deduction is applied to recover debt overpayment, due regard is given to the wider circumstances and vulnerabilities of the liable person. There would be a requirement for this assessment to be documented and available to the claimant on request.
This is a vital safeguard that would place fairness and compassion at the heart of the debt recovery process, ensuring that individuals are not pushed into hardship without a proper understanding of their personal situation. It aligns with my and my party’s commitment to a welfare system that is both effective and humane, recognising that people’s circumstances can be complex—gosh, they certainly can be—and that a one-size-fits-all approach to debt recovery is neither just nor practical.
Amendment 109ZA—we have a wonderful numbering system—would further strengthen these protections by requiring the Minister to consider the additional costs of living with a disability before making a direct deduction order. This would be an essential step in ensuring that disabled people, who often face higher living expenses, are not disproportionately affected by debt recovery measures. Both amendments reflect the principles of proportionality and sensitivity that should underpin all government action in this area. They represent a significant improvement to the Bill’s framework for tackling fraud and error while safeguarding the dignity and well-being of the most vulnerable.
Unlike the noble Baroness, Lady Fox, who said she was a bit hesitant on this, I urge the Committee and the Minister to support these amendments, which would ensure that the pursuit of public funds is always balanced with compassion and respect for individual circumstances. At this stage of the Bill, as mentioned by the noble Viscount, these measures need to be introduced so that we can perhaps on Report include them in the Bill.
Baroness Sherlock (Lab)
My Lords, I am grateful to the noble Viscount for his amendments and to all noble Lords who have spoken. We all want to ensure that, when someone who is subject to these debt recovery powers is vulnerable, we are aware of that and take appropriate steps to treat them as we should. Before I turn to the individual amendments, I shall recap on how direct deduction orders will operate and what safeguards are there, as this is relevant to the debate.
These powers are vital to recovering funds that are owed by debtors who are—just to remind the Committee—by definition not on benefits or PAYE. If they were, we would have other ways to deal with them. These are people who have some other source of income, owe the DWP money and have simply refused to engage with us at all, at any stage. That does not mean that none of them is vulnerable—of course, they may be—but this is the category of people that we are talking about. The department has long-standing powers to recover public money that has been wrongly paid in excess of entitlement, through deductions from benefits or earnings, but not for those in that category.
There are important new safeguards for these powers. They are there only as a last resort. First, before they can be used, multiple attempts at contact must be made, of different types. We must make at least four attempts to contact someone, at least twice by letter. We not simply trying once and giving up. We must have really tried to engage with people who simply do not engage with us all.
Secondly, when a direct deduction order is necessary, the DWP must be satisfied that any deduction, whether a lump sum or a regular deduction, will not cause the debtor, other account holder or their dependants hardship in meeting ordinary living expenses. That means that, legally, the DWP must ensure that there is enough money remaining in an account after a lump sum deduction to allow the debtor to meet their essential living needs.
In response to the noble Viscount, deductions must be fair in all the circumstances. This would include consideration of any vulnerabilities or additional costs related to living with a disability. The noble Viscount helpfully outlined what some of those will be. The point is that they must be particular to the individual. Each individual’s circumstances will be different. As the noble Baroness, Lady Fox, pointed out, not everybody who is poor is vulnerable, not everybody who is on benefits is vulnerable and not everybody who is disabled is vulnerable, necessarily. We need to understand their circumstances to know what is fair and ensure that they will not be pushed into hardship by a deduction.
Thirdly, to ensure that the deduction is made in that way, the amounts will be decided following an affordability assessment based on information shared by the debtor’s bank and any subsequent representations made by the individual or their representative if they need someone to speak for them. Legislation sets out the maximum amounts that can be deducted for regular deduction orders.
Fourthly, the Secretary of State can vary or revoke direct deduction orders in the light of a change of circumstances—for example, if the debtor had a change of income, made a new claim to benefit or something else of significance happened. Fifthly, when a direct deduction order is made, notice must be given to the bank and all holders of the account in question. If an order is still upheld after a review, or after considering information that has been presented, an individual who is not happy with that has a right of appeal to the First-tier Tribunal.
Finally, I remind the Committee that a code of practice for the new powers has been made available for noble Lords to review. This sets out revised guidance on ways to identify and support those who are vulnerable. Ahead of public consultation, our team continues to work on the code collaboratively with key stakeholders, including charities such as Surviving Economic Abuse and the Money and Pensions Service. These are important safeguards which I hope will alleviate noble Lords’ concerns.
On Amendments 99D and 109ZA, it is worth looking at what these amendments would do in practice. While we all share the desire to protect vulnerable groups, these amendments would place additional legal duties on the DWP to consider the impact of any vulnerabilities that a debtor may have, even when it could not be reasonably possible for the DWP to know. These requirements would be imposed without providing any new ways for the DWP to obtain that information.
As I have said, the direct deduction order power is one of last resort, aimed at those who are not on benefits or in PAYE employment, where all reasonable attempts to engage with the individual have failed. These are individuals who have not responded to repeated contact from the DWP’s debt management officials about their debt. In the absence of meaningful engagement from the debtor or their representative, the DWP will not be aware of their current personal circumstances. This puts the DWP in a difficult, if not impossible position, regarding the obligations that the proposed amendments would impose.
However, we need safeguards. The new safeguards that are introduced in this Bill, which I outlined at the start of my speech, alongside the existing safeguards and departmental processes for supporting those who are vulnerable, reflect a better approach to protecting vulnerable people. I shall now set out some of those existing safeguards and processes that are outside of this Bill, for the record.
Layers of support already exist within the DWP to support those who are vulnerable or have complex needs. They include proactive vulnerability checks at different points in the customer journey, and where vulnerable individuals are identified, to ensure that the necessary support and adjustments are put in place. Where any additional support or adjustments are identified by a DWP official or are disclosed by the individual, they are recorded on DWP systems to ensure that all officials know how best to support them.
Baroness Sherlock
“(i) the period mentioned in section 71ZK(6)(a) for P to appeal against the outcome of the review has passed without P bringing an appeal, or”Member’s explanatory statement
This amendment is consequential on my amendment to clause 89, page 56, line 31.
Viscount Younger of Leckie (Con)
My Lords, I have a degree of sympathy for the amendment in the name of the noble Baroness, Lady Fox, and the noble Lord, Lord Palmer of Childs Hill. It touches on a value that I know many of us across this House instinctively support: namely, that powers which interfere with the person’s finances should be subject to proper oversight and scrutiny—in other words, by a court and not by a politician. Let us start with that.
The principle underpinning the amendment is sound. When the state seeks to impose a direct deduction from an individual’s account, that is no small matter. It affects not just policy outcomes but people’s daily lives, and we should never lose sight of that. Much was spoken about that in earlier groups. I am sure that the noble Baroness, Lady Fox, and the noble Lord, Lord Palmer, have suggested introducing a requirement for the court to authorise such a deduction because it reflects the gravity of that particular action.
However—there is a however—although I support the sentiment, I have reservations about the practicality, and I am afraid that the remarks from the noble Baroness, Lady Bennett, have increased my concerns. Requiring every direct deduction order to go through the courts will prove burdensome to the judicial system and may risk making this part of the regime so slow and administratively heavy that it becomes inoperable in practice. That would not only undermine the Government’s legitimate aim of tackling fraud effectively and speedily, but could also result in delays and uncertainty for claimants and public authorities alike. Just to be helpful to the Minister, can she enlighten us on the current state of the backlog in the courts—which is a message she might expect me to give—and how, therefore, Amendment 102, for example, might not be helpful to the process?
I have another question about an appeals process. Everyone, I believe, has the right to an appeal, but how would this work, given the status of the courts? That is a question for the Minister to ponder over. We are, after all, talking about a mechanism intended to recover public money in a targeted and efficient way. If every deduction, regardless of scale or complexity, must first pass through court proceedings, we risk erecting a barrier that stifles the entire process. There must surely be a way of reconciling the desire for oversight with the need for operational efficiency—a challenge that I lay down to the noble Baroness, the Minister.
So, while I cannot support the amendment as currently drafted, I agree that the principle of independent oversight should not be overlooked. There may be better ways of embedding that principle in the system through enhanced safeguards; clearer audit mechanisms; greater efficiency and speed—that is, in expediting the DDOs; and improving transparency around how deduction decisions are made and reviewed.
I recognise this from all who have spoken, and I have listened carefully to all the speeches. I believe that these amendments, and particularly Amendment 102, starts a valuable conversation; even if its solution is not quite the right one, its motivation certainly is. I hope that the Minister can reassure the Committee that the Government recognise the need for these powers to be exercised responsibly but also sensibly so that they can operate effectively, and that they are open to exploring proportionate mechanisms of accountability that simply do not grind the system to a halt, and if so—a very simple question to end on: what could this system be?
Baroness Sherlock (Lab)
My Lords, I am grateful for some really good questions. These are exactly the kind of questions the Lords Committee should be asking on these sorts of issues, and I hope to give decent answers.
Should I ever get round to writing a book, somewhere in the credits it will say “Definitely not a malign person”. I am very grateful to the noble Baroness for that. It is the best compliment I am going to have today —you have to take them where you can find them in this business—so I thank her very much.
Amendments 102 and 122, as we have heard, want to restrict the use of the direct deduction power to circumstances where a court has determined it necessary and appropriate. I thought the noble Baroness, Lady Fox, made her argument very clearly; I hope to try and persuade her that she does not need to press these amendments because I think we have a good case on this.
Baroness Sherlock (Lab)
I apologise; I forgot to answer that. No, it does not. These measures apply to any kind of overpayment but, as I described, they are only matters of last resort. We have to have gone through all the other possibilities and people must simply have failed to engage. So this really will happen only if somebody is absolutely not engaged with us at all. As is the case with deductions from benefits or deductions from earnings, they are available as a tool for overpayments, whether or not they will be used.
Baroness Fox of Buckley (Non-Afl)
I thank the noble Lords who spoke on these amendments for appreciating—even if they did not support—the spirit of what they are trying to do. Despite that, I do actually want to do this rather than just wanting the spirit. But I know that the noble Viscount, Lord Younger, feels that it will not work practically. But we have had a slightly contradictory answer there, because they are either absolutely the last resort and will hardly ever be used—in which case they will not clog up the court system, to be fair—or they will be used a lot more, which means that there is all the more reason for them to go through the courts, if they will be used liberally from the point of view of a safeguard. So I did get confused about that.
Some thoughtful points were made. The noble Lord, Lord Vaux, usefully probed the Minister—in a way that I was not able to—on exactly when and in what circumstances. These questions about the distinction between error and where the overpayment came from matter in relation to the powers that have been created.
Baroness Sherlock (Lab)
I am sorry to interrupt—I never get to say that anymore. I thought it might be helpful for the Committee if I clarified. The noble Lord, Lord Vaux, referred to Clause 89; that actually refers to administrative penalties and recovery for non-benefit payments, not for benefit payments. I should have made that clear. I am sorry to interrupt the noble Baroness, Lady Fox, in full flow—please carry on.
Baroness Fox of Buckley (Non-Afl)
It is very helpful for these things to be clarified. As noble Lords can see every time we are in Committee, I have so many pieces of paper, so I appreciate that and am not saying that I am on top of all the detail.
However, I think it is important, in the spirit of the way that the noble Lord, Lord Palmer, was motivated to support these amendments, that this is not just about the detail; there is an important principle here. I really liked the viral film mentioned by the noble Baroness, Lady Bennett of Manor Castle, because people do care about this Bill and what its impact will be, and we have to be able to answer all the questions as the legislators who are debating it. People know that we are involved in this, and I sometimes feel that it is unclear exactly what will be acquired by all these powers.
The problem with saying that these powers will hardly ever be used is that these powers are going in the statute book, so they can be used. I am not going to talk about bank statements again, but the reason I raised them on this group is because, before a DDO can be introduced, you have to check bank statements through the mechanism of the affordability checks that we will go on to discuss, and that is a breach of privacy. If we are giving the DWP the power to do this, we need to have a check. The way we have done that historically is to rely on the courts to take money. As this is related, I am trying to see whether this could be a useful check to make sure that these powers are not exploited.
We have plenty of time to go, so I think some of us may come back with a version of this amendment—potentially better worded—when we get to Report. It is not just to fly the flag for civil liberties but, as I think the noble Lord, Lord Palmer, said, a need to have trust in the system. If the Bill is to be taken seriously by people who do not just think that it is draconian and who do not do the caricatures that the Minister wants, it must be watertight in its safeguards and protections, as well as in the powers that it creates. Those two things have to live together; otherwise, it will be discredited before it even hits the statute book.
Viscount Younger of Leckie (Con)
I just want to pick up on something quite interesting that the noble Baroness said, which leads me to ask a question of the Minister. I am not expecting an answer now. It is to do with the capacity or number of cases. I have no idea how many DDO cases could end up going to the courts, but it may be more than the noble Baroness, Lady Fox, thinks. I am just reminded of my experience of the Child Maintenance Service: it looks at those people who we know can pay and who are not paying, and they go all the way to the courts. There are many thousands. I rest my case by saying that there is a danger that the courts could be clogged up, but it would help the Committee to have some idea, perhaps in writing, of the number of cases that would or could go to court as a consequence of these amendments.
Baroness Sherlock (Lab)
I will write to the noble Viscount. As he knows from his experience with the Child Maintenance Service, as each form of enforcement comes into view, more and more people simply pay without it being necessary, so a sort of funnel comes down. If we have any information about scale, I would be happy to write.
Viscount Younger of Leckie (Con)
My Lords, I thank the noble Baronesses, Lady Kramer and Lady Bennett of Manor Castle, for tabling this amendment. I recognise the spirit in which this proposal is made—a desire to ensure that the use of direct deduction powers is subject to proper scrutiny and does not override individual rights without appropriate justification.
However, I must express some serious reservations about the effect that this amendment would have. By removing the ability of the DWP to request relevant bank statement information from financial institutions before issuing a DDO, we risk undermining the very evidential foundation that should underpin the use of this power in the first place. If we are to give Ministers and their departments powers to recover money owed to the public purse—a legitimate policy objective that is supported on all sides of this Committee—we must also ensure that those powers are exercised responsibly and on the basis of proper evidence. Access to account information, under strictly controlled conditions, is part of what makes that possible. Without it, the risk is not simply inefficiency or delay. The greater danger is that deduction decisions could be made with incomplete or inaccurate information, leading to inappropriate enforcement action or simply to missed opportunities to recover legitimately owed funds. Neither outcome would serve the interests of fairness, nor would they deliver good value for public money.
We have heard throughout Committee about the importance of a system that is not only robust but proportionate and just. I entirely agree—as our amendments and interventions thus far have made clear. However, for a system to be proportionate, it must be informed, which requires access to evidence. I reiterate the concerns that we raised on these Benches at Second Reading. Schedule 3B (1)(2) (b)(i) makes it clear that an eligibility verification notice, which would serve to identify or help to identify fraud, can be applied only to the bank account
“into which a specified relevant benefit has been paid”.
As my noble friend Lady Stedman-Scott set out at Second Reading, we are concerned that this creates a substantial loophole which could be exploited by fraudsters who are, as the government amendments have suggested, able to find out whether they are being pursued by the DWP through an information request. This is a real issue. It seems a likely and obvious outcome that such a person could move money between the relevant account and another, held with different bank, to avoid scrutiny.
We submit that for this to be an enforcement regime, there cannot be any loopholes or workarounds which may permit a fraudster to hang on to the money that they have stolen from the taxpayer. As we stated at Second Reading, the Bill as set out suggests that the Government will be tied up in a legal bind, ensuring in statute that they cannot verify or ultimately pursue the recovery of funds that are not held within the account specified. However, with the right safeguards and with responsible communication of information, there is surely a way in which this regime can be constructed that is responsible and fit for purpose.
We believe that the Government must expand their capacity and ability to access further bank accounts held in the name of the relevant person to prevent them simply opening another account and moving money around, which, as the Bill is currently drafted, seems to be a clear and easy way for them to avoid both proper scrutiny and will prevent the money being recovered. Perhaps the Minister will say whether parallels can be drawn with the current system set out between HMRC and the banks for the recovery of tax resulting either from overpayments or tax fraud, which I am sure she will say works. That may be helpful.
Finally, I want to respond briefly to the concerns raised about whether these provisions amount to a snoopers’ charter—a charge that has been raised throughout the passage of the Bill. It is right that we scrutinise the scope of these powers carefully, but it is also important to be clear about what the Bill does and does not do. In our view, the Bill sets out defined and limited circumstances under which verification measures may be used. It cannot be doubted that an informed and fair decision on deduction orders can be reached only if it is grounded in accurate and up-to-date information. I believe that it is for the Government to make it absolutely clear in Committee how these safeguards on process will function in practice and how transparency and accountability will be maintained. I understand the sensitivities involved in accessing bank data. That is why these safeguards and oversight mechanisms are important.
With that, I hope that noble Lords will reflect on whether the amendment achieves that balance, and I look forward to the Minister’s response on how the very valid concerns that it speaks to can be addressed.
Baroness Sherlock (Lab)
My Lords, I am grateful to all noble Lords for their contributions. As we have heard, this amendment would remove the requirement for banks to provide information to the department in response to notices, including bank statements, for the purposes of making a direct deduction order. However, getting this information from banks, including relevant bank statements, is not only instrumental to the effectiveness of the direct deduction power—it is crucial as a necessary and important safeguard to ensure the affordability of deductions, which is why we cannot accept this amendment.
I remind the Committee that the recovery powers proposed under the Bill are ones of last resort. They are for those not in receipt of benefit or in PAYE employment who have other income streams or capital and who repeatedly refuse to engage with the DWP to agree an affordable repayment plan. Without the information shared by the bank, the DWP would have no means to consider the debtor’s financial circumstances and would therefore be prevented from meeting other obligations and vital safeguards in the Bill, such as establishing an affordable deduction rate and avoiding causing hardship.
Put simply, if we do not know how much money someone has, we risk taking more than they can afford to repay at that time. The DWP is working collaboratively with the Money and Pensions Service on “ability to pay” checks, using bank statements and, where possible, the standard financial statement principles, to prevent financial hardship. These checks will consider the debtor’s essential living expenses, such as housing and utilities, and the Bill provides that direct deduction orders must not cause the debtor hardship in meeting these expenses.
Using bank statements in this way allows the deduction to be affordable and fair based on the individual circumstances, rather than a blanket approach of leaving a set amount in the account which, if not set high enough, could prevent the debtor from meeting those essential costs. The information gathered through these notices is proportionate and other provisions in the Bill restrict the use of bank statements obtained under this power. They are solely for the purposes of recovering the money that is owed. I say to the noble Baroness, Lady Fox, that it is a legal requirement not to use the information for any purpose other than debt recovery. That is spelled out in paragraph 3(10) of new Schedule 3ZA, inserted by Schedule 5 of the Bill.
I also remind the noble Baroness that all this can be avoided, including obtaining information from a debtor’s bank, if the individual agrees to get in touch to discuss and agree an appropriate repayment plan. In that case, we will not need bank statements because we can talk to them and ask for appropriate evidence, and they can provide evidence of other kinds, if that is sensible.
I will just pick up on a number of things. We are not interested in looking at what people spend their money on. It is worth reminding the noble Baroness, Lady Fox, and the Committee that we have said different things at different times because there are different measures in the Bill. For the EVM over here, there is no transaction data—absolutely not, under any circumstances—and I say to the noble Viscount, Lord Younger, that we are looking only at the bank account into which we pay benefits. Fresh sentence: over here, the DWP’s debt recovery powers are aimed at different people, who are not on benefits as, by definition, the EVM is only for those on benefits. It is aimed at people who are not in PAYE employment, who owe the department money and who will not engage. If at least four attempts have been made to contact them but they simply have not got in touch, we can start to use the powers. In that case, we do have the power under our debt recovery powers to go to any bank account that they have; we are not limited to the bank account into which we pay benefits. As I have just said, we are not interested in looking at what people spend their money on. The power can be used to recover debt only in cases where somebody is not in receipt of benefits, as I have described.
Lord Palmer of Childs Hill (LD)
I thank the Minister very much for responding in that manner, but it is rather like a court case where they say that the jury should disregard what happened. Once the information is out there, human nature makes it very hard to avoid it. If you are the DWP and you look at a bank account and see something that you should not, it is hard then to ignore it. The nature of man and woman is not to ignore things that they see. I am afraid that that just came to my mind: it is like these television dramas where the barrister or lawyer raises points, and the judge says, “The jury should disregard that”. You cannot disregard what you see in a bank statement even if you decide that you should not really have seen it. This is a very dangerous precedent, and I do not think the Minister is living in the real world.
Baroness Sherlock (Lab)
I just remind the noble Lord that these DWP staff are authorised fraud investigators and they work on our fraud teams. In the nature of their work, as it is for anybody who works in fraud or law enforcement, they will end up seeing information, in the course of an investigation, that is not relevant. If he thinks that that means that that information will necessarily get into the outside world, then I ask him to rethink that. Our staff are professionally trained. They are professionals who operate under professional standards, authorisations and accreditation. They know what their job is. If staff come across information and the law quite clearly says that it may be used for only one purpose, it will be used for only that purpose.
Lord Palmer of Childs Hill (LD)
I am sorry, but this does not take account of rogue members of the DWP. I am sure that 99.99% are exactly as the Minister says, but the idea that everyone will observe those rules is—I say again—not the real world. I beg leave to withdraw the amendment in the name of my noble friend Lady Kramer.
Baroness Sherlock
Member’s explanatory statement
This amendment, together with my amendments to Schedule 5, page 108, line 1 and Schedule 5, page 108, line 5, requires a notice under paragraph 5(1) of new Schedule 3ZA to be given to the bank in question.
Viscount Younger of Leckie (Con)
My Lords, I offer my strong support for Amendment 109, tabled by the noble Lord, Lord Palmer. It proposes a vital and compassionate safeguard that ensures that, before any direct deduction order is made, proper consideration is given to whether the individual involved is a victim of domestic abuse—or certainly at risk of it.
We know that domestic abuse too often includes economic and financial control. Perpetrators may take over access to bank accounts, manage benefit claims in their partner’s name or use coercion to extract money. For victims in these circumstances, a deduction order made against a joint or controlled account is not just a technical enforcement step but can be catastrophic and expose them to further harm, deepen their financial insecurity and reinforce the very cycle of abuse that they are trying to escape. The amendment puts in place an essential duty that, before such a deduction is imposed, the Secretary of State must ask a basic question: is this person safe? Are they vulnerable specifically to domestic abuse? Could such action cause caused further harm? I am sure the Committee will realise that these comments are not new. This is not about creating loopholes but about making sure that we do not inadvertently punish the very people who most need our protection. If our system is to be just, it must distinguish between those who are deliberately defrauding the system and those who are themselves being defrauded, manipulated or coerced in private and invisible ways.
I fully recognise—others may raise this point—that this kind of information is not always easy to obtain. As we know, domestic abuse is often hidden, and victims may be reluctant or unable to disclose it. But that is not a reason to avoid the responsibility. On the contrary, it is precisely why we must build protective considerations into the decision-making process. So, if a red flag is raised—whether through third-party evidence, existing support services or patterns in the account—the system must be capable of pausing, asking the right and necessary questions and adjusting course. That is surely not an undue burden; it is what we should expect of a responsible, modern enforcement regime.
Of course, I also note that the Government already have duties under the Domestic Abuse Act 2021—I expect we will hear this from the Minister—and under the wider Equality Act to consider how their decisions impact vulnerable groups. But this amendment gives practical effect to those duties in the specific context of direct deduction orders. It does not create new rights out of thin air; it reinforces and operationalises obligations that the state already carries.
So I ask the noble Baroness two questions. In the system and process designed, and having reached proof of concept with the banks—at least on two occasions; I refer back to previous comments—who is responsible for recognising these issues in respect of account holders? Is it the banks? To what extent do they know such detail about their account holders? Or is it the DWP? Is it more likely to know of such matters? Obviously, in the discussions leading up to and beyond the decision to give out benefits, such issues surely would have emerged. Perhaps the Minister can enlighten us on the precise responsibilities here.
Perhaps the Minister can also confirm that the banks would not see the analysis of vulnerability as a key part of their responsibility—that is linked to my previous point—but that their role is simply to raise a red flag with deliberately limited data, as has been outlined, where there is that match of an account holder in receipt of benefits who also has £16,000 or more in an account.
The final question, which chimes with questions asked on perhaps day 4 of Committee, is: how often are such checks carried out by banks, as requested by the DWP? Or—I need to be put right again; forgive me—is the algorithm such that a flag is raised on a 24/7 basis by an algorithm that does a match? Then a report is given to the bank’s responsible person—let us call him the banking manager.
There is a thread running through this debate about how to balance power and protection. Indeed, it is an issue on which noble Lords across the Committee agree; therefore I warmly welcome this amendment from the noble Lord, Lord Palmer, as it provides us with another opportunity to test out the Government and raise our concerns. This amendment is principled, proportionate and practical. I hope the Government will take it seriously, in the spirit it is meant, and reflect carefully on the values it enshrines. I believe it gets to the very essence of what the Bill is about. With that, I look forward to the answers from the Minister.
Baroness Sherlock (Lab)
My Lords, I am grateful, as ever. The subject of Amendment 109, put forward by the noble Lord, Lord Palmer, is very much as it was in the fourth group, with the earlier amendments in the name of the noble Viscount, Lord Younger. The Committee agrees on the objective in that area and we are simply going to talk about the best way to achieve that.
I thank the noble Lord, Lord Palmer, for raising this issue but again, for reasons not dissimilar to those articulated earlier, his amendment is not the best way to achieve this. However, I hope I can give him the assurance that he is looking for.
The DWP very much understands the importance of this issue. The noble Viscount is right that we have statutory obligations, but it is also embedded in the department. All our front-line staff are trained in addressing the issue of domestic violence, the training is regularly refreshed and we engage with stakeholders: the department take it very seriously.
We are committed to continuing to support victims and survivors of domestic abuse whenever they interact with the department. We have experience in this area, as well as existing guidance and processes for supporting victims of domestic abuse. As I say, the training our front-line management staff receive includes assessing affordability and identifying and dealing with vulnerable customers.
My officials have been looking in detail, specifically at how victim survivors could be impacted by the measures in the Bill, and working closely with key stakeholders, including the charity Surviving Economic Abuse, to ensure that the code of practice sets out the right approach to mitigating risks for victim survivors of domestic abuse. The current draft of the code of practice includes steps officials will take to identify signs of domestic abuse, where possible, to identify risks and to support the individual.
However, although I recognise the important intent behind this amendment, the fact is that it would apply to anyone affected by a direct deduction order, including debtors and non-debtors. Similarly to the earlier Amendments 99D and 109ZA from the noble Viscount, Lord Younger, it does not require or enable the DWP to take any action to identify possible impacted individuals or provide any new means by which the DWP could do so.
Viscount Younger of Leckie (Con)
My remarks will be brief. I thank the noble Lord, Lord Davies of Brixton, for tabling Amendments 109A and 109B, which seek to introduce further safeguards into the process by which direct deduction orders are applied. These amendments are clearly driven by a legitimate concern. I am sure it is one that we all share; no one should be pushed into destitution—note that word—because of enforcement action taken by the state. We on these Benches broadly support the intention behind these amendments. As we expand the state’s ability to recover funds lost through fraud, we must do so in a way that is measured, proportionate and fair. We agree that the person on the receiving end of a direct deduction order must be treated with dignity and that the enforcement should never push a person below the threshold of subsistence.
However, while we agree on the principle, the Bill as currently drafted already contains sufficient protections to give effect to that principle. These amendments propose going further. As the noble Lord, Lord Davies, set out, they would hard-wire specific mechanisms into the legislation itself with a mandatory affordability assessment and a fixed, safeguarded amount of £1,000 to be left in a person’s account. While we understand the motivation behind these proposals, we are not persuaded that they strike the right balance.
First, on the affordability assessment, the key question is not whether such considerations should be made—they absolutely should be—but whether placing a rigid requirement in the Bill is the best way to achieve it. Secondly, regarding the safeguarded sum, the proposal to set a fixed floor of £1,000 may be well intentioned but risks creating unintended consequences. For some individuals, that figure may be appropriate, but for others with significantly higher levels of debt or multiple fraudulent claims—of which there are a few, I am afraid—it may act as an unjustified barrier to recovery. A blanket threshold does not easily accommodate the complexity of individual circumstances.
We must not forget what this system is designed to do. We are talking about the recovery of public funds that were obtained unlawfully. These are not arbitrary deductions, but actions taken in response to fraud—in some cases, large-scale fraud—committed against the public purse. These funds belong not to the state in the abstract but to the taxpayers, the public and the people who rely on our public services. I remind the Committee of our duty to recover them on their behalf. We must exercise this power responsibly and we believe the Bill enables that. We must also ensure that we do not design a system that is so laden with friction that it fails to deliver on its core purpose of upholding the rule of law and restoring funds to the public where fraud has occurred.
These amendments raise important points, and we welcome the values that underpin them. We are committed to ensuring that the system is fair, proportionate and humane. We are confident that the existing provisions in the Bill, supported by robust guidance and operational safeguards, provide a sufficient framework to achieve those goals without introducing additional complexity that may compromise the system’s effectiveness.
Before the Minister thinks that I am writing yet another speech for her, I have some questions for her, which may also be helpful to the noble Lord, Lord Davies. Take the case of someone who has taken money fraudulently but finds himself destitute through his own actions and might otherwise be on the streets, homeless —or worse, hungry. What help can the state give to him? What options are there? As a basic, I presume that he will still be eligible for universal credit, albeit, as the noble Lord, Lord Davies, said, it would be subject to an agreed deduction for his misdemeanours. He would therefore still get support, assuming that he is not allowed to keep the £1,000 in his account. As the noble Lord said, the money and advisory services are there, and Citizens Advice is there. They are there to offer advice, but what support is there for such people in extremis? The Minister may say that the household support fund is also there and could be called upon, but that fund is subject to local help and is in the gift of local authorities to give out. Would destitute people come into that?
In conclusion, we do not support these amendments, but I thank the noble Lord, Lord Davies, for prompting this important and short debate. We look forward to working together to ensure that the final system strikes the right balance between fairness and firm recovery of debt.
Baroness Sherlock (Lab)
My Lords, I am grateful to my noble friend Lord Davies for raising this, and to the noble Viscount for his observations. I agree with my noble friend that affordability assessments should be conducted—he has made that clear, and we certainly want to do that as we think it is important—before a direct deduction order is issued, but we regard this amendment as unnecessary and duplicating existing provisions.
Paragraph 6 of new Schedule 3ZA, inserted by Schedule 5 of the Bill, provides that recovery must not cause hardship to the debtor, any joint account holder or dependant, and must be fair. Paragraph 3 requires the DWP to obtain, via an account information notice, bank statements covering at least the most recent three months in order to help make that assessment.
Further detail on how affordability will be assessed will be set out in the code of practice, a draft of which is available to Members; I am sure that my noble friend has had the opportunity to see it. It sets out the principles that will apply when affordability is assessed. They include ensuring that essential living expenses and other reasonable financial commitments are identified and protected. Officials are working closely with organisations such as the Money and Pensions Service to develop the code and, as required by Clause 93, a formal public consultation will be conducted on the draft before it is first issued.
As I have already outlined, affordability assessments must and will take place prior to enforcing a deduction order. These checks use banks statements, allowing DWP officials to consider expenses such as housing and utilities, enabling the deduction to be affordable, fair and based on individual circumstances, rather than a blanket approach of leaving a set amount in the account which could, if not set high enough, prevent the debtor from meeting those essential costs, as the amounts will vary from person to person.
For regular direct deduction orders, paragraph 6(3) of new Schedule 3ZA requires that any regular deductions made by the DWP each month must not exceed 40% of the monthly average amount credited to the account during the last period in which statements were assessed. Regulations will be made under paragraph 24(2)(d) to further set a maximum rate of 20% for all cases that have not arisen due to fraud.
These figures are maximums, rather than fixed deduction rates. Deduction rates will vary as officials take any affordability, hardship factors or other relevant circumstances into consideration. This approach mirrors that already used effectively in the DWP’s existing powers of deduction from earnings or benefits, and it is not obvious why it should be different in these circumstances. Given the safeguards outlined, requiring that £1,000 be left in one or more of the liable person’s bank accounts in every case where a DDO was sought is unnecessary, as the safeguards will already achieve the outcome intended by this amendment.
Regarding the specific questions, I reassure my noble friend that we are alive to the concerns of UK Finance, which we meet regularly. We are working with MaPS and relevant debt sector organisations on this. He mentioned a comparison with HMRC. HMRC has confirmed that its power is a one-off deduction of a tax debt, not a regular deduction. As a result, it does not assess customers’ affordability as part of the process. Its safeguard instead requires it to leave a minimum of £5,000 across the customer’s accounts to stop taxpayers being left with insufficient funds to cover basic needs. We are taking a different approach: we are assessing affordability, and we will have clear sight via bank statements of the debtor’s ability to repay.
In addition to the work we are doing with MaPS, we are working with relevant stakeholder organisations to make sure that our communications with debtors are clear, to help them understand what we are doing and to engage in the best possible way.
I remind the Committee that before any deductions are taken, account holders will be notified and given the chance to make representations. They can provide relevant information about their financial position and evidence relevant to affordability. Even at that stage, the department’s preference is to reach an agreed position with the debtor. If reasonable payment terms can be agreed and they are maintained by the debtor, the DWP will not make a deduction order.
My noble friend and I clearly want the same thing: to make sure that any recovery is affordable. We have taken different routes, but I hope that what I have said today will help him to accept that our route is doing the job and, in the light of that, he will withdraw his amendment.
I am sorry, I forgot to respond to the noble Viscount about destitution. I may have to come back to him on that, because it would depend very much on somebody’s circumstances. Although the household support fund is locally determined, some directions, steers and guidance are given by the centre by the DWP to local authorities. But the fund is significantly there to help with the cost of living. In relation to someone who is destitute and has committed fraud, people may still, if they have an ongoing entitlement to benefit, have been subject to a loss of benefit penalty as part of a process. So it would very much depend on the circumstances. But if I can find anything else useful, I should be happy to put that in writing to the noble Viscount.
Lord Davies of Brixton (Lab)
I thank the noble Viscount and my noble friend the Minister for comments on my amendments. It has been useful to receive a coherent assessment and description of how this process will work. I will read carefully what was said and consider whether it is an issue that needs to be pursued at a later stage. I thank those who have spoken. I beg leave to withdraw my amendment.
Baroness Sherlock
Member's explanatory statement
This amendment means that a regular direct deduction order given by the Secretary of State must specify the amounts to be deducted.
Baroness Sherlock (Lab)
My Lords, I thank noble Lords and thank the noble Viscount for doing some of my job for me, for which I am always grateful.
I want to try to explain why the Government are doing this. Clause 92 inserts new Section 80C into the Social Security Administration Act 1992 to enact the “disqualification from driving” power. Schedule 6 inserts new Schedule 3ZB into the 1992 Act, containing the substantive provisions of the “disqualification from driving” power introduced in Clause 92. The introduction of this allows the DWP to apply to a court to disqualify a person temporarily from driving if they persistently and deliberately fail to repay their debt. It is therefore essential to boost the DWP’s ability to recover public money.
However, it is worth being clear that this is a power to deal with a small subset of debtors who are persistently frustrating the recovery practice—I will come back to that in a moment. Preventing an evasive debtor from driving unless they repay is within the Government’s control in a way that they cannot circumvent. While it will be used as a last resort, it is an additional and effective tool in cases where debtors simply refuse and evade repayment. As I think I said at Second Reading, the latest results from the UK transport survey showed that 74% of adults have a driving licence. Debtors are unlikely to want to be inconvenienced by being unable to drive. They can avoid disqualification and any other enforcement action by making voluntary repayments.
Schedule 6 sets out when the power may be used and how it will operate, including rules on the operation of suspended and immediate disqualification orders, variation and revocation of orders, as well as the grounds on which an order may be appealed. Appeals may be made to the appropriate court on points of law, including the terms of an order or the court’s decision to make, not make, vary or revoke an order. In accordance with Clause 90, this power will be used as a last resort and, as outlined in Schedule 6, only for the most serious cases for debts with at least £1,000 outstanding. The aim is to deter debtors from deliberately choosing to evade repayment, such as by moving their capital out of reach when they have the means to pay.
Only when all other attempts at recovery have failed, including the new direct deduction order, will DWP be able to apply to the court for a suspended disqualification order. If the court agrees that the debtor had the means to pay but did not repay without a reasonable excuse, it will order the debtor to make what it assesses to be affordable repayments. The debtor can avoid being disqualified by making these repayments set by the court. Only if the debtor does not comply with the court’s repayment terms can the DWP apply for an immediate DWP disqualification order. It is at that point—again, only if the court agrees—that the debtor can be disqualified from holding a licence for up to two years.
Before either a suspended or immediate order can be made, the debtor will have an opportunity to be heard by the court. It is important to note that the court cannot make either a suspended or an immediate order if it considers that the debtor has an essential need for their licence, such as that they need to drive as part of their job or to care for a dependant.
The role of the court throughout this process is an important safeguard, which we have included to ensure a balance between taking robust action against those who deliberately evade recovery and preventing undue hardship. We recognise that stopping someone from driving is a serious step, so my department has built in several other safeguards to give debtors every opportunity to avoid that. For example, missing a single instalment will not normally result in an immediate disqualification order and, even where someone becomes disqualified, they can get the right to drive back when they start making their repayments and the court considers that repayments are likely to continue. But persistent evaders who have the means to pay their debts will no longer be able to evade paying.
In response to my noble friend, I think he is challenging me as to why this is a good and effective means of doing it. I accept that it is unusual, but there is a small subset of the most evasive debtors: people who could pay and just will not. They might be, for example, debtors who transferred their money into cryptocurrency, or fraudsters who moved their capital to offshore accounts that the DWP cannot easily get at because they are outside our jurisdictions. It simply does not seem appropriate. If we cannot do anything else, there is one thing the state can do: suspend or remove their driving licence to pull them to the table. There may be some people for whom this is the only thing that works, so we want to keep it there in our armoury.
The power has been used effectively by the Child Maintenance Service. I do not know whether we can go into enough detail in the CMS debt management data to find out whether I can answer the questions that the noble Viscount is asking, but I will have a look at that. But certainly the Child Maintenance Service believes that this is an effective tool for bringing people to the table when nothing else works.
The Bill includes strong safeguards. The power will not and cannot be used where someone cannot afford to pay. The Bill is clear in paragraph 1(4) of new Schedule 3ZB, in Schedule 6, that the court must be satisfied that the person failed to pay “without reasonable excuse”. That clearly excludes cases where they do not have the means to pay the debt. Of course, the debt must also be of a certain value. Clause 90 says that it must not be “reasonably possible” to recover via other methods, including direct deduction orders, and that this can be used only after they have been given reasonable opportunities to pay.
Viscount Younger of Leckie (Con)
I appreciate the noble Baroness’s very full response. This is more of a probing question. We have obviously been debating and talking about driving licences. The ultimate punishment or sanction is prison, but we obviously do not want to exercise that if possible, both for the individual and because we do not want to clog up prisons. But what other sanctions could there be? We have been talking about driving licences, but I know that, in the Child Maintenance Service, taking away passports was raised as a possible sanction. What thoughts does the noble Baroness have on that front?
Lord Davies of Brixton (Lab)
I thank noble Lords who took part in the debate. I thank the noble Baroness, Lady Bennett, for her support. I am disappointed that the Conservatives, the party of individual freedom, did not see fit to support my argument.
There are a couple of issues that could be helpful to the debate which is likely to take place on Report. If it is possible to get further statistics from the Child Maintenance Service about people who were threatened and then gave in—I cannot totally see how that is possible—that would be good.
There is also the issue of the discriminatory nature of the punishment between different groups of people. As I have made clear, that is a practical objection, which is not why I am against this measure at heart. It would be useful in debate to know more of that practical question. As I have read the paper so far, it is about people who require a driving licence to carry out the functions of their job. However, my noble friend the Minister said that it would cover people who need to drive to work. Perhaps she could interrupt me if she is able to clarify.
Baroness Sherlock (Lab)
It is up to the court to determine if someone has an essential need for a licence. We have deliberately drawn it broadly so that the court can make that determination. Examples were given of somebody who needed a car to go to work or maybe had essential caring responsibilities. In response to the noble Baroness, Lady Bennett, I raised the possibility of somebody who lived somewhere so remote that there was no public transport. Again, that would be a case that they would make to the court. The position is deliberately drawn broadly to allow the court to make that determination.
Lord Davies of Brixton (Lab)
Thank you; that is helpful. I withdraw my objection to Clause 92 standing part of the Bill.
Viscount Younger of Leckie (Con)
My Lords, we now turn to what I believe is the last group for today. I will speak to Amendments 122A, 122B and 122C, which largely concern the code of practice and matters relating to the codes of practice as set out in Clause 93.
These amendments are not only sensible but vital if we are to ensure that the framework for exercising these powers is both transparent and democratically accountable. Fundamentally, our amendments recognise that the code of practice is not a peripheral procedural matter; it is a foundational document. It will guide how sensitive and powerful enforcement powers are exercised. It will shape the expectations placed upon investigators, the protections afforded to individuals and the standards against which public officials will be held. In short, it will govern the operational culture of the entire system.
Amendment 122A would ensure that the final version of the code is laid before Parliament before these new provisions in the Bill can come into force. I feel it is important at this stage to reiterate that we are being asked to grant significant new powers, including powers of entry, search, seizure and direct deduction, and it is therefore wholly appropriate that Parliament sees, and has the opportunity to scrutinise, the final version of the rules that will help determine how those powers are used. We welcome that, and thank the Minister—I perhaps should have said this earlier—for making good on her promise to release draft versions of the code to noble Lords ahead of Committee, although we feel that it is even more important that we have a binding assurance from the Government that a final version of these documents will be made available to Members of both Houses ahead of the Act coming into force.
Amendment 122B would further strengthen this by requiring a public consultation on the draft code before it is issued. I have a feeling that the Minister may have confirmed this earlier; nevertheless, I raise it now and await her reply. Consultation is not just a box-ticking exercise, it is a vital part of democratic policy-making, especially in areas where the state will be interacting with vulnerable people, seizing property or accessing private data. Consultation allows front-line practitioners, civil society groups and those with lived experience to offer their perspective and to flag where guidance may be unclear, safeguards may be weak and unintended consequences might arise. We must not underestimate the value of that input.
We have said many times that our primary goal and function throughout Committee is ensuring that the Government come out with a Bill that is ready to go. We want a public authorities Act that combats fraud effectively and deters criminality in the future but also works for the people who will undertake and be subject to its provisions. It really is important that we get all these balances right and that we incorporate these review mechanisms now, so that the Bill is ready to go once it becomes law.
Finally, Amendment 122C would ensure that any subsequent change to the code is not only laid before Parliament but subject to parliamentary review. This is a particularly important point, because it speaks to the danger of incremental change, where guidance can be revised behind closed doors, without scrutiny or proper debate. These codes are not trivial; they are the operational blueprint of this entire regime. If we in this House and the other place are to fulfil our role as scrutineers and custodians of civil liberties, we must retain the ability to oversee how these powers evolve.
If the Government’s position is that these powers will be used proportionately, lawfully and with care, they should have no difficulty in agreeing that the rules that govern them should be open to parliamentary oversight, public consultation and full transparency. That is not a constraint; it is a safeguard for both the public and the state.
As I have said before, we are of course all agreed on the need to tackle fraud, but we must also agree on the need to exercise these new powers with clarity, accountability and respect for the values that underpin our legal and constitutional system. We believe that these amendments would help to ensure that. I urge the Minister to accept them, or, at the very least, to recognise their merit and return with similar provisions that enshrine the same principle.
Parliament broadly supports what the Government are doing, and if the Government intend to exercise these powers responsibly, with adequate safeguards, consideration and the principle of proportionality that I and my noble friend Lady Finn have returned to several times in Committee, I assume and hope that Parliament will have no problem supporting what the Government do in their code of practice. However, parliamentary oversight, to ensure that the Government are tied to these important principles not just now but in the future, is an important safeguard which we feel must be made explicit in the Bill.
In conclusion, these are reasonable, proportionate and constructive proposals. They would not hinder the Bill’s effectiveness; rather, they would make the Bill more effective once it comes into force. I see that, miraculously, there is no one else wishing to support—I am sure it is no reflection on my remarks—but I genuinely look forward to the Minister’s closing remarks. I beg to move.
Baroness Sherlock (Lab)
My Lords, in the absence of a crowd of supporters, I thank the noble Viscount for setting out his amendment so clearly. I hope that my remarks will reassure him and give him the confidence that he does not need to press ahead with these amendments.
Amendments 122A, 122B, 122C and 129 seek to compel the Secretary of State to conduct a public consultation on the DWP’s code of practice for the debt recovery powers, to lay a final code before Parliament before the powers in this Bill come into force and to subject any changes to the code to parliamentary review. Amendment 128 would require the Minister for the Cabinet Office to lay a code of practice before Parliament on the administration of penalties before the PSFA’s powers under Part 1 can come into force.
The provision made for a code of practice in Clause 93 is important for the DWP’s debt recovery measures, providing transparency and reassurance on how the debt recovery powers will be operationalised. However, we think these amendments duplicate existing provisions in the Bill and therefore are not necessary.
The DWP’s code of practice on debt recovery powers will complement the provisions in the Bill, setting out guidance and key principles, including how and when the new recovery powers will be used. Extensive collaboration continues to take place with a wide range of stakeholders, including the Money and Pension Service, the charity Surviving Economic Abuse and the finance sector, to develop this code of practice. The purpose of this engagement is to ensure the code provides relevant operational guidance on matters such as vulnerability and to give clarity for debtors subject to the powers and their representatives. We are grateful to all organisations for their helpful collaboration and guidance.
Drafts of all the DWP codes of practice have been made available for review by noble Lords upon request. While there is no requirement on us to provide drafts of these codes alongside the legislation or even to legislate to produce one, we understand their importance and want to be transparent with Parliament. This is also why new Section 80D(6), as inserted by Clause 93, already requires us to carry out a formal public consultation before the first code is published and to lay each issued version before Parliament. In response to the noble Viscount’s questions, the Government are consulting on all codes. Both the DWP and the PSFA will publish them before first use.
We have already said in terms of the debt, this will be done before the new debt powers in Part 2 of this Bill are used. However, I should note that Amendment 129 as drafted would prevent all the other provisions in the Bill that are not subject to the debt code of practice coming into force until the debt code was issued. I am not sure if that was the intention of the noble Viscount, but it would obviously be disproportionate and unnecessary.
It is also not clear from the amendment what parliamentary review of future changes to the code would entail but I am going to assume the noble Viscount would like Parliament to have the opportunity to challenge or scrutinise the code each time it is updated. If so, that would not be necessary or proportionate. The code will be revised periodically to keep it up to date with operational considerations and processes, and the Bill makes provision for each issued revision to be laid before Parliament.
The noble Viscount mentioned the importance of Parliament seeing the rules. It is worth understanding that the debt code of practice does not contain statutory provisions, nor does it place obligations on others. Rather, it sets out how the department will operationalise the new recovery powers. The Bill clearly sets out in considerable detail the legal obligations introduced. Other substantive provisions set out in regulations will, of course, be subject to normal opportunities for parliamentary scrutiny. I am also unaware of any precedent for revisions to a code of this nature to be considered by Parliament or subject to its approval.
Amendment 128 takes us back to the PSFA in Part 1 of the Bill. Noble Lords will recall that we have already discussed Clause 62, which makes provision for the PSFA to produce a code of practice that will explain how and why civil penalties will be calculated and imposed to ensure the powers are used transparently and reasonably. This clause stands part of the Bill.
A draft of the PSFA code of practice has also been provided to noble Lords, as was promised in Committee in the other place. As I mentioned, the PSFA intends to consult widely on the code of practice prior to the publication of the finalised draft, which will be before the first use of the penalty powers. Indeed, Clause 62(4) states:
“The Minister must lay the code of practice, or any reissued code of practice, before Parliament”.
I have outlined that the provisions already in the Bill go above and beyond what is required for legislation of this kind because we recognise the importance of the code of practice and have done so in the spirit of transparency. With those assurances, I urge the noble Viscount to withdraw his amendment.
Public Authorities (Fraud, Error and Recovery) Bill
Baroness Sherlock ExcerptsMonday 16th June 2025
(1 week ago)
Grand CommitteeRead Full debate Public Authorities (Fraud, Error and Recovery) Bill 2024-26 View all Public Authorities (Fraud, Error and Recovery) Bill 2024-26 Debates Read Hansard Text Read Debate Ministerial Extracts Amendment Paper: HL Bill 96-IV(a) Amendments for Grand Committee (Supplementary to the Fourth Marshalled List) - (13 Jun 2025)
Viscount Younger of Leckie (Con)
My Lords, I offer my support for most of the proposals in this group of amendments, which strike me as largely thoughtful, proportionate and consistent with the principles that we have returned to time and again throughout this Committee stage: clarity in law; accountability in process; and fairness in the exercise of power. As we know, we have spent three days carefully scrutinising the powers set out in this Bill—powers that are, by any measure, significant. In that context, it is right that we continue to ask whether the safeguards accompanying these powers are sufficient and, where they are not, how they could be strengthened in a practical, proportionate and legally coherent way. We believe that these amendments are consistent in furthering that principle.
First, I have taken note of the cautionary tale arising from the Australian experience, as raised by the noble Lord, Lord Sikka. Amendments 76 and 78, which seek to clarify liability for errors or omissions in information provided under Clause 72, are rooted in a basic but essential legal principle: parties need to know where responsibility lies. If someone is being compelled to provide information under threat of penalty, it must be clear whether they or a third party acting on their behalf will be held liable for any inaccuracies. Without clear statutory guidance, we risk confusion and, worse still, unjust outcomes where individuals may be penalised for honest mistakes or information errors outside their control. These amendments would address that problem in a measured way by introducing transparency and clarity into the process.
Amendment 77 addresses a slightly different but equally important concern. As the noble Lord, Lord Vaux, outlined so eloquently, we are focusing on proportionality and reasonableness in the exercise of investigatory powers. The amendment would insert a reasonableness test requiring that an authorised officer must reasonably consider the request for information to be necessary and proportionate. To my mind, this is simply good law. It reflects what is already expected in broader public law standards, but writing it clearly into the legislation would give both officials and the public confidence that such powers are bound by objective legal norms. It would strengthen decision-making, improve accountability and, perhaps most important, provide a clearer basis for redress if powers are exercised in an overly broad or inappropriate manner. However, I note from the remarks made by the noble Lord, Lord Vaux, that we cannot—or should not—say, “Oh, joy of joys”, in respect of the guidance provided.
With clarity established as to where responsibility lies, by necessity a process will have to be put in place and be tested to make sure that there is oversight and sign-off. If the Minister is not minded to accept Amendments 76 and 77, can she outline in detail what the process is? If she cannot do so, I ask her to write to me and to copy in all those noble Lords who are involved in today’s Committee. The Minister may say that this is all part of the as-yet-unfinished “test and learn”, but a full answer is requested. I think I have picked up that she may be able to enlighten us in this respect at the beginning of this fourth day in Committee. I hope so.
However, I must express my concerns and ultimately oppose Amendment 79 in the name of the noble Lord, Lord Sikka, on the grounds that it risks undermining the effectiveness of the very system that we are seeking to strengthen—although I note the example given, the sad story of Ms Green, highlighted by the noble Baroness, Lady Bennett. The amendment would require that a copy of every information notice issued under Clause 72 be sent to all parties affected by that notice, including, crucially, the individual who is the subject of the investigation.
Fraud investigations, particularly in the social security context covered by Clause 72, often rely on timely access to accurate information before the subject of the investigation is made aware. This is not a matter of secrecy for secrecy’s sake; it is a matter of preserving the integrity of the evidence and preventing interference with the process. If a person suspected of fraud is notified that they are under investigation or even that information about them is being requested from a third party, there is a very real risk that they may destroy or tamper with evidence, close accounts, alter records or otherwise act to frustrate the inquiry before it has a chance to develop properly. This is not speculative; it is a well-established principle in law enforcement and regulatory practice. It is not clear when this notice would be sent, but there is an assumption in the amendment in the name of the noble Lord, Lord Sikka, that it would be sent immediately—perhaps he could clarify that when he winds up—in which case, I rest my case.
There is a reason why investigators, whether in HMRC, the police or other regulatory bodies, are often permitted to conduct inquiries without giving advance notice to those under scrutiny. To do otherwise, as I said, would be to tip off the very individuals whose conduct is in question and, in doing so, jeopardise the ability of investigators to properly undertake their duties. Investigators would be hampered at the outset, fraudsters would have an early warning and those operating within the system in good faith, including civil servants, local authorities and partner organisations, would find it significantly harder to detect and prevent abuse. This is particularly true in cases of organised or sophisticated fraud, where timely access to third-party data may be the only way to build a case before the trail goes cold. It is also true in cases where vulnerable individuals, perhaps manipulated by others, may be at risk of harm if alerted prematurely. I will return to that theme later today.
Of course, we must always strive for fairness and accountability, but there is a distinction between eventual transparency and instant notification. There are appropriate points in the process when the subject is made aware of action against them and can engage in a process of review, but to mandate notification at the earliest investigative stage before facts are even established would, I believe, give potential wrongdoers an unearned advantage. Therefore, I respectfully suggest that the practical consequences of this amendment would be counterproductive and potentially damaging to the very goals of the Bill. We need a fraud enforcement system that is lawful, proportionate and fair but also capable of operating effectively in the face of growing and increasingly complex threats to public finances. That is why I cannot support this amendment.
To conclude, a balance must always be struck between individual rights and the broader public interest. In this case, that balance lies in ensuring that information requests are reasonable, that liability is clear and that powers are used with restraint and purpose but not in mandating disclosures that could derail legitimate investigations. I therefore welcome Amendments 76 to 78, but I am afraid that I urge caution about and ultimately oppose Amendment 79.
The Minister of State, Department for Work and Pensions (Baroness Sherlock) (Lab)
My Lords, I thank all noble Lords who have contributed to this short debate and I welcome the Committee to Part 2 of the PAFER Bill. We are on to the DWP and it will be a joy to travel in this ship together with my happy fellow travellers. Before answering the specifics of the amendment, I want to reflect on some of the comments made by my noble friend Lord Sikka, because he helpfully highlighted a couple of the confusions that have permeated some of the discussion around the Bill.
The Bill contains a number of different measures and, in most cases, they apply to different people. In his speech, my noble friend spoke as though these information-gathering powers applied to all those people to whom, for example, an eligibility verification notice will be sent. In fact, that is not the case at all. A number of the amendments coming up next are about the eligibility verification measure, so I will return to any comments about it then. These information-gathering powers are quite different. They are specifically aimed at people of whom there is a reasonable suspicion of fraud by a named individual. This is a particular category of person.
Clause 72 makes provision for expanded information-gathering powers. There are existing powers in the Social Security Administration Act 1992, but they enable DWP to compel information only from a set list of organisations. That approach is restrictive and can delay or prevent the gathering of information that is relevant to proving or disproving a criminal benefit fraud investigation. So new Section 109BZB, inserted into the 1992 Act by this Bill, will update those powers to enable DWP to obtain relevant information from any information holder in respect of a DWP criminal investigation. That kind of information can be vital in proving or disproving an allegation of fraud.
Amendments 76 and 78, tabled by my noble friend Lord Sikka, concern liability for incorrect or incomplete information provided by an information holder in response to an information notice. The Bill is clear that information providers must comply with the information notice and should also be aware of their own data protection obligations in doing so. Information about those obligations will be included in the code of practice, and the information notice must specify the potential consequences for failing to comply.
Section 111 of the Social Security Administration Act 1992 sets out offences for intentionally failing to provide required information, as well as delaying or obstructing an authorised officer. In those circumstances, DWP can take action. So introducing a separate statutory liability for all errors is not necessary and would, in my view, actually place an unfair burden on information holders, particularly when mistakes are unintentional or minor.
Amendment 77, tabled by the noble Lord, Lord Vaux, would insert “reasonably” into subsection (1)(b) of new Section 109BZB. I hope to persuade the noble Lord that we in fact have a very good case here. I think that it will be easier to write. There may be some disagreement about his comments about JOYS—this will be another theme, I think; I suspect that “Ode to Joy” jokes and other joy jokes will abound. But I will write, because I want to talk specifically about the amendment that he has tabled today and how that affects the DWP parts of the Bill.
The current drafting of subsections (1)(a) and (1)(b) of new Section 109BZB in Clause 72 sets out that, prior to issuing an information notice, an authorised officer must have “reasonable grounds to suspect” that a DWP offence has been committed and must consider it “necessary and proportionate” to require the information. Both those steps have to happen, so I would argue that the drafting already captures the intent of the amendment. We have been doing this for some time. The department already has these information-gathering powers, with well-established training and guidance in place to ensure that they are used appropriately and in line with the existing law.
Authorised officers are trained and accredited before they can use those powers and they have to adhere to the code of practice. The existing guidance makes it clear that they have to consider all the facts, justify their decisions and record their reasoning. That will apply in the same way to the new expanded powers as it does to the current powers. For those reasons, we are confident that the principle of reasonableness is clear in the drafting of Clause 72 and we further support it. I can see that the noble Lord is itching to get to his feet.
Lord Vaux of Harrowden (CB)
I understand the noble Baroness’s point. It was because it said “reasonable grounds” in the first half that the fact that it was missing in the second half—paragraph (b)—stuck out: you have to have reasonable grounds, but then you just have to consider. But my point is more than that. Let us imagine the worst-case scenario, where a future Government decide to go for an all-out DOGE approach to whatever. I have no doubt, as I said, that the noble Baroness and the department at the moment will follow the guidance, et cetera, that she laid out, but that is just guidance and it can be torn up on a whim. If a new Government decide to go all out, there is no reasonableness safeguard; they can just say, “We consider it necessary”, and there does not need to be any reasonableness attached to that. That is the concern. It is not about now; it is about where we might be in a year or five years’ time that worries me.
Baroness Sherlock (Lab)
I see where the noble Lord is going with this and I am happy to pick up the conversation outside. I do not think that the distinction is big enough for it to be a problem, because the reality is that a reasonable suspicion is not just a hunch: it has to be based on an objective test, it requires up-to-date and accurate information and it must be something that an ordinary reasonable person would consider a legitimate cause for suspicion given the same information. So, for information gathering to be legal and justified, the intrusion into a person’s privacy must be necessary, proportionate and in accordance with the legislation. We think that that is belt and braces, but I am happy to pick that up with the noble Lord because I think that we want the same thing. The only question is: do we need any more ways of saying it?
Finally, Amendment 79, in the name of my noble friend Lord Sikka, would require DWP to copy the information notice to all parties, including the subject of the information request. The noble Viscount, Lord Younger, has explained the obvious reason why this is the case: since these powers apply only to named individuals about whom there is a reasonable suspicion of fraud, telling somebody at the outset could clearly prejudice the investigation and potentially enable them to conceal or destroy evidence.
Baroness Sherlock (Lab)
Obviously, I am not going to comment on individual cases. As the noble Baroness will be aware, there is an inquiry going on into the carer’s allowance on which we hope to report in the near future, so we will learn more from that.
Let me be clear here: this is the question of whether somebody should be told in good time that they are being investigated. Clearly, that would be a problem. There is a reason why that precise problem is recognised in data protection legislation, which sets out the circumstances in which the DWP and other government departments can process data for law enforcement purposes without notifying the relevant data subject.
To pick up the noble Baroness’s point, it is not as though somebody would never know because, if a fraud investigation uncovered reasonable suspicion of fraud, at some point, for a case to go anywhere, there would have to be an interview under caution with the person suspected of it. The conversation about what had happened would take place at that point, so it is not as though they are never going to know about it; they would have to know about it. We are talking about how they are told, including in what way and at what time. Although I understand where my noble friend Lord Sikka is coming from, the reality is that his proposal would make it impossible to investigate fraud effectively and would allow those who wish to avoid appropriate action on their problems the opportunity to get away with it.
The final comment from the noble Viscount, Lord Younger, was about oversight. As with the review of investigations, the oversight of these measures will be carried out by His Majesty’s Inspectorate of Constabulary and Fire & Rescue Services. I hope that that reassures him.
I hope that all that has helped to assure the noble Lords and that, on that basis, they will withdraw or not press their amendments.
Lord Sikka (Lab)
I am very grateful to everyone for their contributions to this debate. I want to come back on a couple of issues.
I fully understand the arguments made against Amendment 79, but at the moment the individual becomes aware that something is afoot only much later in the day. Individuals rarely have time to seek legal advice. They often cannot afford legal advice. Early notification that they are subject to scrutiny, especially when they have never committed a crime and are just under suspicion, would mean that they may be able to save the DWP some time, effort and money on needless investigations. They may even be able to go to the local citizens advice bureau or somewhere else to get some advice. Leaving it until a much later stage inevitably means that there will be a lot of psychological stress for people. They will probably throw in the towel, a bit like the sub-postmasters, and think, “I’ve got to get off this merry-go-round. I will plead guilty even though I am not, because I cannot really contest anything with the Government”. So, I understand the arguments made, but I think that the current position of not telling the benefit claimants much earlier on really will lead to problems.
The Minister referred to the information provider’s duty for data protection and so on, but I have a concern, given that the DWP will make errors. It has a history of making thousands of them. Given that banks make errors in providing information, once DWP officials have received the information from the bank, they have to interpret that information and make sense of it. There will be misinterpretations, which will have serious consequences for the people affected.
The question to which I still have not heard an effective answer is: who will be liable? Who will pay the compensation? Will it be the public purse? Will it be the banks? The DWP will have a statutory relationship with the bank and hence can demand information, but banks are normally required to preserve confidentiality or financial information, and a bank will not ask anything from the individual concerned. It cannot at that point be said to owe a duty of care to somebody with whom it does not actually communicate, especially when that duty of care is eroded by the Bill. So the question remains: who will foot the bill, which could run into billions of pounds, if we end up with a similar situation to the one in Australia? I hope that the Minister can clarify that situation about who will foot the bill.
Viscount Younger of Leckie (Con)
Before the noble Lord sits down, I want to raise something, which is more of a question to the Minister and the team behind her. When I was in post, I became perhaps infamous, particularly when I did not understand something, for asking for a flow chart, and I wonder whether this is such a case where a flow chart would be extremely helpful. By that I mean that, when a process starts, what happens? One answers yes or no to questions and then it follows through with the safeguards included. I would find that incredibly helpful, and I suspect the team has one already. If there is one, I would find it helpful to see how the system works and where the safeguards are.
Baroness Sherlock (Lab)
I have never seen a flow chart, but some of these powers are not necessarily part of the same process, so they would not necessarily appear on the same piece of paper. But if I have any other way of explaining it, I would be very happy to do that.
Since I am on my feet, I reiterate that if the DWP is asking for information about an individual and it gathers information, it will most likely be doing so from a number of sources. An authorised officer will then review the information, and if there is felt to be a case for fraud, they will then interview the suspect under caution, who will be given the opportunity to get appropriate advice. There will be a process of engaging and discussion, but even before it gets to that stage, it is entirely possible that somebody will have reached out to find out the reason why an overpayment has been made. So, there are plenty of opportunities, and this specific amendment relates specifically to the extension of an existing power, which is used only when there is reasonable suspicion of fraud by a named individual. So, I do not think this amendment would help achieve the kind of things that have been discussed, and I urge the noble Lord to withdraw the amendment.
Lord Sikka (Lab)
I am very grateful to the Minister for that reply, which gives us plenty to think about—and perhaps a flow chart would be helpful in due course. For the time being, I beg leave to withdraw my amendment.
Baroness Finn (Con)
My Lords, I rise to speak to this group of amendments, beginning with the Clause 74 stand part notice in the name of the noble Baroness, Lady Kramer, which was moved by the noble Lord, Lord Palmer. In our view, Clause 74 is not only necessary but foundational. It establishes the power to issue eligibility verification notices, which enable authorised officers to request information relevant to verifying a person’s entitlement to public funds or services. This is not an ancillary function; it is a mechanism that enables the Bill to work.
We broadly support Amendment 79B, which proposes the addition of a reasonableness test to the Secretary of State’s power to issue eligibility verification notices under Schedule 3. Throughout this Committee stage, we on these Benches have consistently returned to a set of core principles that should underpin the powers granted by this Bill: proportionality, accountability and clarity in the exercise of discretion. This amendment is very much in keeping with those principles. It would not constrain the function of the powers in question; instead, it would help to ensure that they are used lawfully, wisely and in a way that retains the confidence of both the public and those institutions asked to assist in their implementation.
Specifically, this amendment would require that the Secretary of State be “reasonably satisfied” that issuing an eligibility verification notice is both necessary and proportionate to the objective of identifying incorrect benefit payments. That is, by definition, not an unreasonable bar. It is not designed to frustrate the aims of the Bill or delay the work of the Government. On the contrary, it would simply formalise the expectation that the powers conferred under Schedule 3 should be exercised with care and justification.
This point is particularly relevant when we consider the position of banks and other financial institutions, which may be required under this provision to provide customer information. For those institutions, it is critical that the system is seen to be operating within a clear and lawful framework. They are being asked to co-operate in a sensitive and complex process. Ensuring that the Secretary of State is “reasonably satisfied”, and that this standard is explicitly in the Bill, would help to provide clarity, legitimacy and protection for all parties involved. As the noble Lord, Lord Vaux, and the noble Baroness, Lady Bennett, made clear on the previous group of amendments, legislation needs to be made for the future and, as such, reasonableness safeguards must be on the face of the Bill.
Moreover, this amendment would reinforce public confidence in the system. When members of the public know that strong powers, such as those that allow government access to eligibility-related data, are being exercised only after a specific, documented and reasonable assessment of necessity and proportionality, they are far more likely to view those powers as legitimate. Trust, as we know, is a critical currency in any enforcement regime.
This amendment would not obstruct the use of eligibility verification notices. It would simply require that they be issued on the basis of reasonable grounds, with a clear and proportionate purpose. It would bring consistency to the Bill, reassurance to the institutions involved and greater credibility to the broader anti-fraud effort that we all wish to support.
We oppose Amendment 80, which would substantially limit the exercise of eligibility verification notices under Schedule 3 to the Bill by requiring that they may be issued only where the welfare recipient is already suspected of committing a DWP offence. I suggest that this amendment risks undermining the core function of eligibility verification and, in so doing, would weaken the entire framework that the Government are proposing to put in place to detect and prevent fraud. Let us be clear about the purpose of the eligibility verification power: it is not primarily an enforcement power but rather a tool of assurance and risk management, designed to help to identify cases where payments are being made incorrectly.
The core problem with this amendment is that it conflates suspicion with verification. It assumes that an authorised officer must already suspect a DWP offence before reviewing financial data. In practice, however, it is often the financial data itself—the information provided in an account—that gives rise to that suspicion in the first place.
I turn to Amendment 89. We support the principle behind this amendment, which seeks to ensure that the powers contained in this Bill—substantial powers, we must all acknowledge—are exercised only in relation to the specific benefits explicitly listed in the Bill. This is not a wrecking amendment, nor one that seeks to undermine the Government’s legitimate goal of strengthening our response to fraud and error. Rather, it is about ensuring that when we legislate new powers, they are accompanied by a clear, democratic mandate and appropriate parliamentary scrutiny. The provision that this amendment seeks to remove would grant Ministers the ability, by regulation, to extend the application of these powers to further benefits beyond those originally listed. I submit that such an extension should not be done by regulation alone but rather with the explicit consent of Parliament through primary legislation or a tightly scrutinised process.
The powers outlined in Schedule 3, including access to personal financial information, the issuance of eligibility verification notices and the ability to act on suspicion of fraud, are not minor administrative tools. They represent a significant expansion of state capacity to inquire into private affairs in the name of public interest. That may well be justified in many cases, but it is only right that Parliament retains control over when and how these powers are extended to new areas of social security.
Supporting this amendment means drawing a line in the sand that the list of benefits to which these powers apply is not open-ended and that any extension should come back before Parliament for proper consideration. If, in future, a compelling case is made to include additional benefits, let that case be made here, in public, with scrutiny and accountability. That is how we ensure confidence in the law, in enforcement and in our broader welfare system.
This is not about resisting action on fraud but about ensuring that the tools we use to combat fraud are clearly grounded in public consent, which gives the system legitimacy. It is about protecting the balance of power between executive action and legislative oversight.
We have made the argument throughout Committee that clarity, transparency and accountability must be woven into the fabric of the Bill. This amendment speaks directly to those principles. It ensures that the powers in this legislation are not allowed to expand by stealth but only by clear, deliberate parliamentary decision.
I hope that the Minister will see this not as a restriction but as an opportunity: to reinforce the legitimacy of the powers the Government seek and to show that we are committed not only to effective fraud prevention but to the principled governance of that process. For that reason, we support this amendment.
Finally, in addressing the stand-part notice of the noble Baroness, Lady Kramer, on Schedule 3, we understand that this is an area of concern for many noble Lords across the Committee, but we do not feel that removing the schedule from the Bill is necessarily the most constructive way to go about this in Committee.
I appreciate that this is probing, and we therefore hope that the Government will use this opportunity, in responding to the stand-part notice of the noble Baroness, Lady Kramer, to address the concerns that we and many other noble Lords have raised in Committee, even if we do not support the noble Baroness’s stand-part notice.
Baroness Sherlock (Lab)
My Lords, I am grateful to noble Lords who spoke on this. I promise not to speak for long on this but, since it is the first time we have discussed the eligibility verification measure, I will, for the record, try to explain how it works, and, I hope, help the noble Baroness, Lady Fox—I apologise for my failure to explain it to her hitherto. I will have a go at doing that, and I will talk to the amendments as we go.
Clause 74 introduces new Section 121DB and Schedule 3B to the 1992 Act. They contain the provisions for the eligibility verification measure, which enables the Secretary of State to issue a bank or other financial institution with an eligibility verification notice, or EVN, which will help the DWP identify incorrect payments in the social security system. Ensuring that the right person is paid the right amount at the right time will help prevent both fraud and genuine errors, meaning that people do not accidentally build up debts, with all the concern that that causes.
As I set out at Second Reading, this is a data-requiring measure. It will enable the DWP to ask for data from banks to help identify incorrect payments and verify eligibility for specific benefits. It is about requiring banks to look within their own data and provide limited, relevant information on the accounts they have identified that match the eligibility indicators provided by the DWP. Just to clarify, we will ask the banks to look at accounts into which we make benefit payments, and we will give them the criteria, which clearly can only be things related to eligibility for the benefits under question.
That limited information will help the DWP to identify where claimants do not meet eligibility criteria for the benefits they are receiving. Getting access to information is key to addressing the whole fraud and error challenge. But if your Lordships think about other areas, we have seen how the DWP getting access to data such as earnings information from HMRC has massively reduced income-related overpayments. In fact, if you look at people on PAYE and universal credit, earnings-related fraud and error have pretty much been wiped out by getting access to earnings data directly from HMRC.
I will speak to Schedule 3 in a few moments. Let me look first at Amendment 79B from the noble Lord, Lord Vaux, which seeks to ensure that an EVN may be issued only when the Secretary of State is satisfied that it is necessary and proportionate to do so to achieve the aim of identifying incorrect benefit payments. This is the nub of it. Clearly, I agree that the power must be proportionate and necessary before we use it. We are bringing forward the legislation because we believe it is necessary, and we have already taken enormous steps to ensure that it will be used proportionately.
The reason it is necessary is that taxpayers deserve to know that every pound of their money is being spent wisely, and that benefits are being paid to those who need them and are legally entitled to them. This measure will improve the DWP’s access to important data to help verify entitlements, to ensure payments are correct, and to stop overpayments building up and debt accruing.
The National Audit Office made a telling point in the Commons at the evidence stage, basically saying, “If you want to enforce the eligibility criteria that Parliament has set, such as capital limits, you have to provide the DWP with a tool that goes a bit further than just asking people”. We do not know of other ways to get the necessary information to be able to pursue the kind of overpayments and fraud that are out there. However, I just remind the Committee that the measure has been designed with hugely strict safeguards, most of which are in the Bill, and they are supported with further detail in the code of practice, of which noble Lords have seen a draft, to ensure that the power is being used fairly and proportionately. The legislation sets out the benefits in scope, of which more later, and the type of information that can and cannot be shared under the power, and includes provisions to bar financial institutions from sharing transaction information or special category data.
Baroness Bennett of Manor Castle (GP)
My Lords, the Minister made a powerful point about the position of the current Opposition. As she identified, the old-age pension being covered in the former iteration of the Bill caused an enormous amount of concern. Obviously, all the groups we are talking about are potentially vulnerable, but old-age pensioners are particularly vulnerable and prone to be stressed and worried about this situation. Can the Minister assure me that the Government will not put the old-age state pension underneath the Bill?
Baroness Sherlock (Lab)
My Lords, I am grateful to the noble Baroness for giving me the opportunity to recover my voice and to say that not only will we not do it but the Bill says explicitly that the measure cannot be used on the state pension, so there is no question of it being used for that.
The case load is really straightforward. Fraud in the state pension is so low that it is the one area where the NAO does not qualify the accounts. We have to have a rationale. The reason we have chosen these three benefits initially is specifically because they are the areas where fraud is significant, and we know the information is out there that could make a difference. I can absolutely reassure the noble Baroness on that point: without amending primary legislation, this measure cannot be used on the state pension, and the Government will not do that. Any subsequent Government would have to change the law to be able to do it. I am grateful to the noble Baroness.
Viscount Younger of Leckie (Con)
My Lords, I intervene briefly to add a little history on the reason we included pensions. As the noble Baroness, Lady Bennett, may know, there is some fraud in the pensions area, to the tune of £100 million. This, I admit, is not as much as the £9.5 billion in welfare fraud that the Minister cited, but I just wanted to put the record straight; there was a reason for including pensions.
Secondly, you can have it one way or the other. We thought it would be good to put all benefits in scope in primary legislation, but I accept that another way of doing it is to limit it to the three benefits, as this Government have done, with a view to having secondary legislation for including others. I understand that.
Baroness Sherlock (Lab)
I am grateful. The noble Viscount is quite right: there is some fraud in the state pension. It was a judgment about proportion, having compared the size and value of the case load. It is very small. The fact that the affirmative procedure is used means that there will have to be a debate. The Government cannot simply on their own start investigating new benefits without anyone knowing about it, so that makes a difference.
The Bill is clear that, to help make this measure proportionate, only the minimum amount of information necessary is shared with DWP by the banks. That can include only details about the account, such as an account number and sort code; details to identify the individuals, such as names and dates of birth; and details about how the individuals appear to be breaching the eligibility criteria for their benefit. But still at that point, no one is suspected of having done anything wrong; the presumption of innocence remains, because further inquiries are needed to establish whether a benefit has been incorrectly paid.
Some people may have disregards in place that mean they are allowed to have more money than is normally used in the benefit rules. For example, normally you are allowed to have only £16,000 maximum in capital to be entitled to universal credit, but there are reasons why you might have more than that. Some forms of compensation payments are disregarded, for example. There may be a perfectly good reason, which will be investigated at that point—and that will be that. Others may have made a genuine mistake that has led to an overpayment of benefits, which it is important to correct as quickly as possible for the individual and the organisation.
However, there will be some cases, especially in the early stages, that ultimately lead to fraud being identified; that conclusion will never be drawn from these data alone. As is the case now, any claim where a suspicion of fraud arises is referred to our specialist investigation team, which has to undertake a thorough investigation, following all reasonable lines of inquiry before any determination can be drawn.
Just to reassure my noble friend, whether he accepts it or not, in fraud and error cases, decisions on entitlement will be made by a DWP staff member.
Lord Davies of Brixton (Lab)
It is clear that we are talking about two different stages here. The first intervention into the bank accounts of individuals will be done algorithmically. The DWP will provide the banks or whoever with the set of criteria that they should apply, and the banks will run it through their computers and that will throw up cases. No individual will be involved at that stage. Cases that are highlighted then referred to the DWP are the ones where human intervention will start. But there are the two stages, and the human intervention is at the second stage, not the first.
Baroness Sherlock (Lab)
I think that we are going to repeat ourselves at each other. This is essentially a data-requiring measure—it is a data push. The data is coming across to DWP, and that data will be used with other data, and where there is an indication that there may be an overpayment, it will be dealt with either by reaching out to the individual or, if there is a possibility that it is fraud, it will be referred for a fraud investigation. Any decision on benefit entitlement and fraud and error is made by a DWP staff member.
Lord Davies of Brixton (Lab)
I hope that the Minister will forgive me for making the point, but it is crucial. The bank will send a data file with cases that it has flagged. Will cases from that data file be identified by humans or by the DWP algorithmically?
Baroness Sherlock (Lab)
I think that we are talking at cross-purposes here. The information will be sent across to DWP, and DWP will take information on an individual and, if there is a signal that an individual may have a breach in eligibility criteria and may have more money in their bank account than is permitted, that information will be looked at and taken together with other information and a DWP staff member will make a judgment about what to do about that. I do not think that I can be any clearer than that.
Viscount Younger of Leckie (Con)
I am standing up to be helpful to the Minister. For fear of being rather like a long-playing record, I think that a flow chart would be incredibly helpful—so I am pressing my case for a flow chart. That is all that I shall say.
Baroness Sherlock (Lab)
My Lords, I am not a flow chart gal, but if anyone is capable of turning this into a useful flow chart, I shall have a look into it.
I fully accept, being an observant person, that not everybody in the Committee agrees with these measures. It is clear that they can make a difference to tackling fraud and error. We think that they are proportionate, but I accept that some Members do not think that, and that is obviously completely legitimate. We simply take a different view.
In the next few groups of amendments, we get to look at different aspects of how that would work, but it is the Government’s view that the scale of fraud is such that it needs to be tackled. If there were other, simpler ways in which to do it, we would have used them by now. This is a source of data that will help us to tackle fraud and error in overpayments, which we do not have at the moment. We do not see any other suitable ways in which to do it, so we think that it is proportionate. We have wrapped it around in safeguards as much as possible.
Baroness Fox of Buckley (Non-Afl)
The Minister has been very helpful. There are obviously disagreements philosophically, but what is confusing is that the financial service representatives have suggested that this is a trawling exercise—the quote given was of a “fishing exercise”. The Minister has stressed, “Don’t worry: when we go to the banks and ask for this information, it is suspicionless. We are not treating people as though they have done anything wrong; we are simply finding out”. That is a huge admission that the state—the Government—is going to the banks and demanding that they provide information for no other reason than that these people are on benefits.
Lord Vaux of Harrowden (CB)
I will jump in quickly before the Minister continues. She has been very helpful in explaining how this is going to work. I should say, as I have before, that I think this is infinitely better than it was when we saw it a year or so ago—I just put that on the record again. However, there are two questions about how it works on which I would like clarification.
First, I think the Minister indicated that the banks would not have to trawl all bank accounts, but I do not think that that is right. The logic must be that the DWP provides the criteria that it wants to look at, which is whether someone is in receipt of benefits and, secondly, whether there is a flag. In order to identify whether they are on benefits, the banks will have to trawl through all the accounts to find that out. That seems a necessary step—they have to spot the indicators in the accounts.
More importantly, though, this is not a one-off exercise under the Bill. They do not just send it once and then go away. The Bill allows for these things to be periodic within 12 months, and they can then be extended. I am interested to understand what the Government intend by “periodic”. Under the way that it is currently written, they could be saying, “I want you send us this data every day—or indeed every hour or minute—for the next 12 months”, and they could then extend it. What is the plan in terms of the periodicity of this?
Baroness Sherlock (Lab)
Let me deal with the noble Lord first, because that will be quick and I am conscious of the time—I have already gone over the 20 minutes. The DWP will tell the banks, “We have a reference number and these are the accounts at your bank into which we pay benefits; please look only at those accounts, not those of anyone else”. I have been saying this all the way along the line, but I have clearly failed to get this across. The noble Lord may recall the previous discussions when we were asked why you could not look at every bank account, and the reason is—
Lord Vaux of Harrowden (CB)
I am still not convinced that that is correct. I think that what happens is that there is an indicator that goes with the payment of the benefit, and we are then asking the banks, first, to identify all accounts where that indicator exists—so they have to look at all accounts to identify which those are—and, secondly, for those accounts, whether there are any with an eligibility indicator that is flagged. My reading is that it is in fact quite clear, and it is also clear in the code of conduct and the other stuff.
Baroness Sherlock (Lab)
In as much as we will say to the banks that we would like them to look at the accounts into which we pay benefits and will give them the reference numbers. Clearly, it is up to the banks how they identify those. I think it unlikely that they will take each bank account, look at it individually and make a decision, but it is up to them. We simply want them to look at those bank accounts and to tell us whether, within those bank accounts, they believe that the particular eligibility indicator that we have given them is correct.
Regarding frequency, we will negotiate that with the banks. The previous Government looked at an earlier iteration of this and ran two proofs of concept to establish that it would work and be effective. We now have to take the powers in order to be able to start doing this. So, we have agreed that we will work with a small number of banks and work out bit-by-bit how this works, bring over information as we can manage it, make sure that the system works, and build up as we go. We will determine from that how often we will need to do that and how it works. That has to be determined; we could not determine that in advance because we need the powers in the Bill to be able to start the process.
In response to the noble Baroness, Lady Fox, it is a question of proportionality. Clearly, we already ask the Revenue to tell us how much people earn in order to determine whether or not they meet the earnings criteria for, for example, universal credit. We could simply allow people to tell us, but when we did that, some of them got it wrong; many of them made mistakes; sometimes it changed, and sometimes they deliberately did not tell us. So now, we simply get information directly from the Revenue.
We think that the power is proportionate. Whenever someone compares it to something that feels disproportionate, such as spying or putting bugs in everyone’s houses, I think that we can either claim that this is a mass surveillance power like China would use and then wonder why people are getting paranoid about it, or, while I do my best to be specific about what we are trying to do, we can all try to have a measured conversation about whether or not it is reasonable, while fully accepting that for some people the line will be in a different place than for others for reasons of both philosophy and proportionality. I fully accept that.
I have done the best I can in 25 minutes. On that basis, I urge noble Lords to agree that the clause stand part.
Lord Palmer of Childs Hill (LD)
My Lords, I thank the Minister for that tour de force. I am afraid the problem is that we all have different ideas about what is proportionate. From what I have heard, I do not think what the Government are suggesting is proportionate, and that is where the problem arises. I come from the feeling that there is a presumption of innocence, and this seems to me almost a presumption of guilt.
The Minister has not taken the point about the nervousness of banks. If a bank gets even a modest inquiry—anyone who has a bank account knows that this happens if there is a certain inquiry on your bank account—signs go up in the algorithm used by the bank saying, “We’ve got to look at this”. Anyone who is a Peer or an MP knows that their affairs can be looked at more closely just for that very reason. I hope that, on Report, we can deal in greater detail with how nervous the banks will be about what is proposed. I hope the Minister can come back and give us reassurance from real banks—joint-stock banks—that have said how they view this. I think they will view it wanting to be on the safe side.
However, at this stage, I will not press my noble friend Lady Kramer’s clause stand part notice.
Baroness Sherlock (Lab)
My Lords, I am grateful to all noble Lords who have spoken on this group of amendments.
Amendments 81 and 91 in the name of the noble Lord, Lord Vaux, speak to the costs that banks may incur as a result of this measure and asks whether they are proportionate to the savings achieved. Let me say, first, that we acknowledge that, clearly, there will be new requirements on banks as a result of this proposed legislation. It is right that additional asks on banks are scrutinised, and I am grateful to the noble Lord for giving the Committee the opportunity to do that. I can assure the Committee, first, that we are bringing the legislation forward precisely because we believe that it is necessary; and, secondly, that we have taken steps to make it proportionate. We have already been through why we think that it is necessary, in our debate on the previous group, so I will not dwell on that again; let me just say that, given the scale of the savings and the lack of alternatives, we think that this legislation is necessary and that the safeguards make it proportionate.
Various noble Lords asked about the cost. We have estimated, based on initial consultation with industry sources, that the set-up cost will be around £40 million across the sector and that there will be some limited ongoing compliance costs for data holders; further information on that estimate can be found in the published impact assessment. We recognise that there is more work to do with industry to consider the costs further. That is why we committed to publishing a further, updated impact assessment within 12 months of Royal Assent: to update the estimate, taking into account the ongoing work with industry, and to ensure that there is transparency on the costs as we move forward. I assure the Committee that the Government take burdens on business seriously. We are committed to keeping requirements and costs proportionate and to a minimum; this has been a key aim at the forefront of our close and regular engagement with the finance sector.
We are not starting from scratch here. As we have discussed, the previous Government tested this approach through two proofs of concept. We know that it works. We continue to work closely with UK Finance and the finance sector on the delivery of a policy to minimise costs; I can reassure my noble friend Lord Davies both that there have been a number of meetings and Bill forums with UK Finance in recent weeks and that it will carry on working closely with us.
A few banks—a small group of them—are already working closely with us on the design and build of the digital solution that will be used to facilitate the transfer of information, in order to ensure that it is developed in a way that works for the sector. I just want to put on the record our appreciation to those banks for their valued input.
Let me say, however, that the Government can be held to account. The independent reviewer must consider whether the measure has been effective at helping to identify incorrect payments. The independent reviewer could also report on the burdens and costs that financial institutions might experience as part of that assessment. If financial institutions believe that Government are overreaching, they also have the right of review and appeal. Financial institutions can use the reviews and/or formal appeals processes to dispute an EVN, including if they determine that complying with an EVN would be unduly onerous. This is set out clearly in Parts 3 and 4 of new Schedule 3B, as inserted by the Bill. For those reasons, we believe that the amendment is not necessary.
Amendment 83 would require financial institutions, when asked to provide data to the DWP under this provision, not to provide it if they reasonably consider that doing so would conflict with their duty of care towards their customers. My concern is that this amendment assumes that we are asking banks and other financial institutions to look into the individual data that they provide to the DWP. That is absolutely not the policy intent. Let me again remind the Committee that information shared by financial institutions is done so without suspicion or presumption of any wrongdoing on the part of the claimant.
This type of data-sharing is not new to government. The Government already have similar powers to request data from financial institutions or third parties. Noble Lords will be aware, I am sure, that HMRC has the power to obtain data at scale from banks on interest-bearing accounts to support its work in gathering up taxes from all of us. For financial institutions, the duty of care owed to their customers includes obligations on a range of matters, including treating their customers fairly, taking reasonable steps to protect their customers against fraud and scams and providing fair-value services. There is nothing within the eligibility verification measure that would affect or impede these duties from being fulfilled.
This amendment would also have a practical impact: it would put greater burdens on financial institutions. The EVM is simply a data-requiring power; it does not ask financial institutions to make any assessments about the data shared. Asking them to do that would fundamentally change the basis of the policy and increase the burdens on them. I have already said that we have been working closely with the finance industry, and I can assure the Committee that we will carry on doing so.
I speak finally to Amendment 89C, which seeks to remove the risk that information that arises only as a result of complying with an EVN could by itself cause a bank to have to take specific reporting action against the account holder under the Proceeds of Crime Act 2002. I am grateful to the noble Lord, Lord Vaux, for raising this, and I hope to persuade him that the current provision already addresses this issue.
As I have said, the EVM is a data-requiring measure; it is not decision-making power. Information is shared by financial institutions without suspicion or presumption of any wrongdoing on the part of the claimant or account holder. EVM information will be used by the DWP to support our normal processes to help verify a claimant’s eligibility for the benefit that they are receiving. However, to give certainty on this point, we have already created an exemption in Schedule 3 that amends the Proceeds of Crime Act 2002 to make it clear that failure to disclose offences will not be committed if the information that the individual or institution has is only as a result of an EVN. To be clear: if the only reason that the institution has the information is as a result of an EVN, they will not be guilty of a failure to disclose offence under POCA. We have reflected this point in the EVM code of practice. This recognises that, while EVNs are not intended to indicate any wrongdoing, the DWP cannot legislate categorically for whether a person knows that there is other information a financial institution may be aware of.
We are not in a position to dictate to someone else whether they must or must not know or suspect something. This amendment seeks to prevent a person from knowing or suspecting that an offence is being committed if the information that leads them to that conclusion has arisen solely as a result of EVM. In other words, it seeks to legislate for a person’s state of mind—whether they know or suspect something—which we do not think is the way to do it. Our provision maintains the focus on the information available and aligns with the existing POCA exemption for information obtained, for example, as a result of carrying out specific immigration checks.
I always try to explain things in language that I would understand. My understanding is that, as currently drafted, the clause says that you cannot be guilty of a specific offence if you do not report somebody under SARS where the information comes only from an EVN. This amendment would fully exclude someone’s ability to suspect someone who may be acting suspiciously, and that cannot be possible. I hope that that makes sense to the noble Lord, Lord Vaux. He may want to reflect on it and come back to me, but that is the reason why we think that this is not the way forward and why what have done is the right way. I therefore believe that the current exemption, as drafted, is sufficient and aligns with the DWP’s intent that data returned by financial institutions does not in itself suggest any suspicion of fraud.
I will address some of the other comments made, starting with those of the noble Baroness, Lady Fox. I accept that there is a question about what is appropriate out there, but banks already have to do a range of things, including, as I said, HMRC having to report on interest-bearing accounts. We believe that the burdens are proportionate. After the set-up costs, we will see the details to be worked through with them, but once the systems are set up, we do not believe that this will be an extensive burden. Therefore, we hope that that will not be too much of a problem.
Viscount Younger of Leckie (Con)
My Lords, I wish to speak broadly in support of Amendment 82 in the name of the noble Baroness, Lady Fox of Buckley. This amendment goes to the heart of something that we should all be able to agree on: that the public have a right to know the rules by which they may be judged and that those tasked with making assessments, such as banks, should not be left to act on unclear or unpublished guidance.
This amendment would require the Secretary of State to publish the eligibility indicators that banks are expected to use when checking their customers’ accounts under the new regime. In plain terms, it asks the Government to set out clearly, before these provisions are enforced, what criteria are being used to determine eligibility. This chimes with the opening remarks made by the noble Baroness, Lady Fox. It is difficult to see how a system of such potential consequence to individuals and to financial institutions alike can be implemented fairly, if the basis on which it operates is not published and understood in advance.
We have heard throughout the debates on this Bill about the need to balance effective fraud prevention with the protection of individual rights, proper due process, and clarity for institutions involved. Amendment 82 speaks directly to that balance. If banks are to play a front-line role in identifying accounts or individuals under suspicion, they must be given unambiguous and publicly available guidance to avoid the risk of overreach, error or unjustified intrusion. We cannot have a system where accounts are flagged or actions taken on the basis of indicators that are withheld from public view. That would be both untransparent and unjust.
We should not legislate for a regime that affects people’s access to their financial resources or that places duties on banks to act in quasi-investigative ways, without knowing exactly how those judgments are to be made. This is not a wrecking amendment—it does not oppose the broader framework of the Bill. It merely insists that, before new powers are exercised, the public and partners involved in delivery know the criteria. That is not too much to ask. In fact, it is the very least we should expect in a system rooted in fairness and good governance. Again, this echoes the remarks made by the noble Baroness, Lady Fox.
To pick up on remarks made by the noble Lord, Lord Vaux, there is a balance to be struck between not giving too much away in the interest of transparency so that fraudsters are given fuel to manipulate the system. Can the Minister say where that balance should be struck, as balance there must be?
Similarly, I speak in support of Amendment 88, also in the name of the noble Baroness, Lady Fox. I believe it represents a sensible and timely addition to the schedule. As we have discussed throughout the passage of this Bill, the use of data and automated decision-making, particularly through algorithms, is becoming an increasingly central feature of fraud detection and eligibility verification. That in itself is not a problem; it is a reflection of the complexity and scale of modern fraud threats. But it also means that we need clear and consistent standards for how these tools are developed, deployed and scrutinised. The cautionary tale from the Netherlands, highlighted by the noble Baroness, Lady Fox, is very much noted. I am sure that the Committee has noted it.
This amendment goes to the heart of the need for standards. By requiring the code of practice to include mechanisms for the scrutiny of algorithms used by those in receipt of eligibility verification notices, typically banks, it creates a shared framework for oversight. This is particularly important when algorithms are applied across several discrete institutions, each of which may have slightly different internal systems, standards or even risk profiles. Without a common baseline, we risk inconsistency, a lack of accountability and potential harm to individuals through opaque or poorly calibrated processes.
Moreover, new sub-paragraph (g) proposed in this amendment rightly extends that principle of scrutiny to the powers themselves, and we must also be willing to assess whether they are effective and 100% secure in their specified and sole objective. We must also be willing to assess whether they are proportionate to the outcomes that they set out to deliver. In short, this is a practical amendment rooted in the principles of clarity, consistency and continuous improvement—perhaps part of the test and learn. It does not obstruct the Government’s goals; it helps to make them more credible and accountable, we believe.
I express my support for Amendment 89ZA in the name of the noble Lord, Lord Vaux of Harrowden, which I believe strikes a careful and important balance between transparency, accountability and the effective operation of the powers contained in this schedule. At its core, this amendment does something quite simple but significant: it ensures that individuals applying for or receiving relevant benefits are clearly informed—that is, in writing—that information relating to their bank accounts may, under certain circumstances, be shared with the Secretary of State. This is a matter of basic transparency and fairness. I note that this is being proposed at the time the benefit is applied for, and I might describe it—perhaps putting words into the mouth of the noble Lord, Lord Vaux—as part of an induction process when one applies for any benefit in scope. In other words, fair warning is given that a benefit that comes from the taxpayers’ pocket has responsibilities attached to it. Perhaps this should also be placed in the code of practice, and I ask that question of the Minister.
If we are to entrust public authorities with powers of this magnitude—which allow for sensitive financial data to be accessed without the individual’s active consent—surely it is right that we also commit to informing individuals of the possibility that those powers might be used. This is not about compromising investigations or alerting fraudsters in advance; it is about ensuring that people understand the system that they are entering and can act responsibly and lawfully within it. Providing this information up front reinforces personal responsibility. As I said earlier, it says clearly to the individual, “If you are claiming public money, there is a legitimate expectation that your eligibility may be subject to verification”. It allows claimants to know the rules of engagement in advance, and it ensures that they cannot claim later to have been caught unawares.
At the same time, I recognise, and I think the noble Lord does as well—I hope he does—that this amendment must not inadvertently encourage more sophisticated methods of deception. It is a fine line to walk, and this chimes with my earlier question to the Minister. We must not turn transparency into a user manual for fraud, but I believe that this amendment is framed carefully enough to avoid that risk. It does not disclose when, how or under what criteria information will be requested—only that it may be. That is, I believe, a proportionate step. Ultimately, this amendment supports the legitimacy of the wider regime, and I therefore support it and hope that the Government will see it as a constructive addition to the schedule.
Baroness Sherlock (Lab)
My Lords, I am grateful to all the noble Lords for their comments. Amendment 82, tabled by the noble Baroness, Lady Fox, would require the Secretary of State to make public the eligibility indicators, as set out in EVNs. Although I understand the point that she is making, I am firmly of the view that making public the eligibility indicators will be counterproductive, for reasons alluded to by the noble Lord, Lord Vaux. It is set out very clearly in the Bill that all eligibility indicators have to link to the eligibility criteria for those benefits that are within the scope of the EVN measure: universal credit, pension credit and ESA. Those eligibility criteria are widely available for anyone to see, including on the GOV.UK website. The DWP does its utmost to ensure that customers who claim benefits are clear on the relevant criteria, and they are reminded many times throughout their claim of the need to report changes of circumstances against these key criteria. This is important because there are people out there who are not fraudsters but who make genuine errors, and we do all we can to help people understand the eligibility rules and ensure that changes of circumstances are reported.
As the noble Viscount alluded to, there is a fine line between transparency and making things easier for fraudsters, but I do not want to publish the specific eligibility indicators that we will set out in an EVN, because to do so would actually help those who want to commit fraud to circumvent the measure. We know from all kinds of sources that there are people out there who study every single rule and piece of information we put out to try to work out how to get around them and get money to which they are not entitled. The Committee would obviously want us to do everything we can to avoid that. So, to protect the effectiveness of this measure and to help stop fraud, we do not think it appropriate that we publish the eligibility indicators.
Turning to Amendment 88, also from the noble Baroness, Lady Fox—
Lord Vaux of Harrowden (CB)
Before the Minister moves on to Amendment 88, I asked about the cross-comparison with datasets from different banks; this goes to the point that the Minister has just been making about it being easy to commit fraud. To what extent will data from bank A be amalgamated with data from bank B to discover whether, when combined, there is an eligibility indicator flag?
Baroness Sherlock (Lab)
An EVN can be used only in relation to the bank account into which the benefit is paid. Therefore, that would be a specific bank account in a specific bank. Of course, the DWP’s authorised investigators have and use a range of sources where they have a suspicion of fraud, and there is a range of mechanisms out there to look at what other information can be gathered in order to make that judgment. I can see that I have not hit on what the noble Lord was asking for.
Lord Vaux of Harrowden (CB)
In the situation where there would be a suspicion of fraud, you have bank A—actually, I suppose it would not have provided the information, would it?
Lord Sikka (Lab)
Related to that, as far as I understand it, some benefits can be paid into foreign bank accounts but they are totally beyond the scope of the Bill, so, presumably, if there is fraud there, it will never really be tackled. Secondly, is it permissible for a UK-resident benefit recipient to request that the benefit be paid into a bank account in the Cayman Islands, the Bahamas, Cyprus or somewhere else?
Baroness Sherlock (Lab)
Just to be clear, this measure is attacking both fraud and error. It looks at overpayments, whatever the source. It is simply one tool among many that is available to the DWP and which will help produce a source of information, which will help to identify incorrect overpayments. Having got that information, the DWP will use the full range of powers and the information available to it. If any fraudsters are sitting down on a quiet Monday afternoon and watching this Committee, they should be warned: the DWP has lots of sources of information; it will investigate them; and it successfully prosecutes many people for fraud. The DWP will use this and other powers to pursue what is there. However, this measure alone has been scored by the OBR to save up to £940 million over the next five years. No single measure will be foolproof alone; it will play its part alongside a range of measures and processes to help root out fraud.
I will have to write to my noble friend Lord Sikka on the Cayman Islands. I do not have them at the back of my mind at the moment, I am afraid, but I will let him know if there is an issue over there.
I say to the noble Baroness, Lady Fox, that I fully accept that there is a line between giving all details in public and tackling fraud. We have given out a lot of information and a lot of protections here, and we have found ways of making sure that there is oversight. One reason for having oversight is that there are things that we will never be able to put out in public; it is important that somebody has scrutiny and can report to Parliament, independent of the department, on how these powers are being used. We would hope that that picks up the remaining areas of concern.
I turn to Amendment 88, also in the name of the noble Baroness, Lady Fox. I will address in turn the two points that it raises. The first is the requirement for the code of practice to include information about the ways in which scrutiny can be applied to the methods that a financial institution may use to identify relevant accounts, for the purposes of the eligibility verification measure. This is not a matter for a code of practice. The criteria that financial institutions must use to identify relevant accounts are described in paragraph 1(2)(b) of new Schedule 3B to the Social Security Administration Act 1992. Accounts must simply meet two tests in order for information to be shared by the financial institution with the DWP: first, the account must receive a relevant benefit payment or be linked to that account; and, secondly, the account in question must meet the criteria that the DWP sets out in the eligibility verification notice. Financial institutions operate in many ways. It must be for each individual financial institution to determine how it identifies relevant accounts.
The key point here is that the EVM asks banks to return specified data only where those two tests have been met. It is a data-requiring power; we are not asking banks to do anything more than that. Again, I remind the Committee that it is the DWP that will review all the information received and DWP staff who will make any decisions about entitlement where potential fraud or error is identified. No decisions will be taken using EVM data alone; decisions about entitlement will be made only once the DWP has made further inquiries.
On that point, the Bill does not introduce any new use of automated decision-making. The DWP will examine data received from banks under the new power, alongside other data received, to determine whether there has been an incorrect overpayment. As is set out in our personal information charter, which is publicly available, the DWP uses automated processing in some decision-making to help us deliver efficient services. The DWP will not make any decision that has significant effect based solely on automated processing unless the law allows this, and claimants will be informed if we make any such decision.
I turn to the second issue in this amendment. It would require the code of practice to contain information about measures that would enable scrutiny of the effectiveness of the EVM. This is, again, an important issue but not one for the code of practice. However, I completely agree with the noble Baroness, Lady Fox, that we must assess how effective the EVM is; that is why, under Clause 75, the independent overseer of the measure must consider the extent to which the exercise of the power has been effective in helping to identify incorrect payments of relevant benefits.
Finally, I turn to Amendment 89ZA, which raises the issue of informing claimants that the EVM may be used to require the sharing of information about their relevant accounts with the DWP. Let me take a moment to update the Committee on the ways in which the DWP will inform claimants and relevant account holders about the measure; I hope that this will reassure the noble Lord, Lord Vaux. The DWP has a personal information charter that sets out how it uses and stores personal information. It is publicly available, and claimants are explicitly directed to it at all times when the DWP requests their personal data. We will update the DWP personal information charter to make it clear that the EVM may be used to require the sharing of their personal information; that commitment is made clear in the draft code of practice, which noble Lords have seen.
This amendment suggests that we should inform claimants either at the start of their claim or within three months of the EVM becoming operational. Our approach of updating the personal information charter means that customers are much more regularly informed about the EVM; this is because claimants are regularly directed to the document throughout their claim. For the benefit of the Committee, I can confirm that claimants are explicitly directed to it in all DWP claim forms; in change of circumstance and uprating letters; in recorded telephone messages; in DWP agents’ telephony scripts; on digital online services; and in other products where the DWP collects personal data. As noble Lords will know, the draft code of practice, which will be publicly consulted on, makes clear that all those who hold a personal account into which a relevant benefit is paid should be aware that information about them and their relevant accounts may be shared by a financial institution with the DWP if the eligibility indicators specified in an EVN are met.
Lord Vaux of Harrowden (CB)
There is a big difference between pointing someone towards a data protection statement—let us be brutally honest: how many of us have ever read one?—and telling people that their bank account details can be provided to the DWP as a result of having this particular benefit. Nobody has ever read a data protection statement, and I do not suppose that they ever will.
Baroness Sherlock (Lab)
To be clear, their bank details cannot be accessed by the DWP under this measure; their bank details can be accessed by the DWP under its other powers. I know that the noble Lord knows this but I want it to be clear for the record because there is a lot of misunderstanding out there; I hope that he will let me finish my sentence. The DWP cannot access people’s bank accounts using this measure or look at transaction data. It does not see what they spend their money on or any of that. It can simply ask banks to let it know whether a particular criterion is met. I take the noble Lord’s point; we think that this is adequate, but he does not, so I am afraid that we may just have to agree to disagree on this one.
Regarding the noble Lord’s other point, on how much data and how many different banks will be involved—and when—we had two choices in doing this: test and learn, which is the subject of much comment; or the alternative, which is a big bang involving all the banks going out together at once, getting their data, bringing it in and going through it. We decided not to do that, as we thought that it would be irresponsible. Test and learn means that, for the first 12 months of the rollout, we will initially work closely with a smaller number of banks and financial institutions, identifying any possible areas for concern, allowing them to be addressed and sorting out teething problems. The measure will then gradually be rolled out with all the relevant financial institutions. The impact assessment says that, in the first year—2026-27—we expect a rollout rate of around 2%, going up to 25% in 2027-28. The idea is that you start very small, make sure that it works, iron out the problems and then grow it as it goes on.
I think it was the noble Baroness, Lady Fox, who mentioned that the data could be slowed down. We do not want to bring in data that we cannot process; we want to bring in data that is appropriate. We will bring it in and manage it, as we are able and resourced to do. I hope that that reassures noble Lords; I encourage the noble Baroness, Lady Fox, to withdraw her amendment.
Viscount Younger of Leckie (Con)
I want a bit of clarity on test and learn. We have had two exercises, which have reached proof of concept. I am confused now because the Minister is, I think, indicating that there are test and learn exercises still to begin. How many are ongoing and how many are due to begin?
Baroness Sherlock (Lab)
Clearly, I am expressing this really badly, because I have said it about 17 times and still have not explained it clearly.
When the noble Viscount was a Minister—perhaps it was his predecessor—under the previous Government, they were working with banks to find out whether the proof of concept worked. The answer is that, yes, it does. Test and learn is about saying, “We’re now going to build this up and operate it at scale. How do we do it? What does it look like?” Bit by bit, we will work with a small number of banks; try it out; make sure that the processes, the data pushes and so on work properly; and work with a small number of people who also understand how the sector works as a whole. Then, when it is working, we will roll it out to a wider number.
I am sorry if I have not been explaining that clearly, but that is the difference. The proof of concept asks: can it be made to work? The answer is yes. The test and learn asks: what is the best way to set this up so that the systems will work and so that we get the right information at the right time—a time when we are able to work it properly? I hope that that has helped.
Baroness Fox of Buckley (Non-Afl)
I give many thanks to noble Lords for their contributions to this debate. In some ways, it has clarified quite a lot for me; in some ways, I am completely confused. I will go off and read the debate, reflect on it then work out how to bring this issue forward on Report.
I thank the noble Viscount, Lord Younger of Leckie, for his supportive remarks in general and the insights that he brought; they are much appreciated. I thank the noble Lord, Lord Vaux, for drawing attention to my dilemmas around transparency. I want there to be more transparency but, as I said, I do not want to be associated with being an idiot—well, that ship might have sailed—in relation to giving the game away. Transparency is important in politics and in terms of trust in a new Bill that will bring about a huge change in the way the state is viewed, in terms of how it relates to citizens on benefits and so on. One of the reasons for this confusion and difficulty is that this Bill insists on treating fraud and error indistinguishably. That is one of the dangers with it. Fraud is one thing, but people who are inadvertently overpaid when errors are made are treated with the same piece of legislation. That is why it was helpful of the noble Lord, Lord Sikka, to remind us earlier that there are people who will play the system—that is one thing—while there are other people who could inadvertently be treated like criminals.
Baroness Sherlock (Lab)
I am grateful to all noble Lords. The noble Viscount just described these amendments as thoughtful and necessary. I think that they are characteristically thoughtful, but I hope now to persuade the noble Lord, Lord Vaux, that they are not in fact necessary. This is a good one, so I offer the noble Lord this.
First, to be clear, Amendment 84 would require an authorised person to need more evidence than just that provided through the EVM before carrying out an investigation under new Section 109BZB, which is to be inserted into the Social Security Administration Act 1992 by this Bill. I agree that the fact that an account meets an eligibility indicator set out in an EVN does not on its own constitute reasonable grounds for suspicion and cannot on its own be used as grounds for exercising fraud investigation powers under new Section 109BZB of the Act. The meeting of an eligibility indicator does not mean that a benefit has necessarily being overpaid. As I have made clear before, the EVM information does not come with a tag of suspicion attached.
The fact that an account meets an eligibility indicator does not mean that there are any grounds for suspicion of fraud or other offences; it does not even mean that a benefit has necessarily been overpaid. Paragraph 3(1) of the EVM legislation makes it clear that eligibility indicators indicate only that a benefit may have been, or may be, incorrectly paid. Whenever the DWP reviews a claim following the receipt of EVM information, it will initially look into its own systems to cross-reference between the data received via the EVM and the information that the customer has previously provided to the department. The DWP’s existing powers under Section 109 of the Social Security Administration Act 1992 can be used only where there is a reasonable suspicion of fraud, and only DWP-authorised officers will be able to request information under new Section 109BZB.
The requirement for reasonable suspicion before exercising powers under new Section 109BZB is set out in that section. This means that, before a case is referred to an authorised officer for a criminal investigation and these information-gathering powers are used, certain criteria must be considered: there must always be a reasonable suspicion of fraud, and all information requested must be necessary and proportionate for the investigation.
Amendment 85 would require information received following an EVN to be reviewed by an appropriately senior person before a person’s benefits can be amended or suspended, or before further investigatory powers can be used. Again, I hope to persuade the noble Lord, Lord Vaux, that this is not necessary. First, as I said, the eligibility verification measure is a data-requiring power, not a decision-making power. We have been clear that the limited data shared by financial institutions does not suggest any wrongdoing on its own. Data will be used, if appropriate, by DWP officials to make further inquiry and to ensure that the benefits being received are correct in line with the claimant’s circumstances and the relevant benefit eligibility criteria.
Obviously, the noble Lord does not specify what “an appropriately senior person” is. Let me assure him that these DWP officials are already trained to make these decisions, and they do so every day as part of the DWP’s business-as-usual activity. Decisions on claims and applications are made by trained officials on the Secretary of State’s behalf every day. This applies across many of the DWP’s processes with claims and applications; those decision-makers are usually administrative or executive officer grade.
When fraud is suspected and DWP wishes to use the power under new Section 109BZB of the Social Security Administration Act 1992, this can be used only by a DWP authorised officer of executive officer grade who has been trained and accredited. Only these authorised officers are able to request information under these powers, and they must always have reasonable grounds to suspect a DWP offence and consider it necessary and proportionate to require the specified information.
In all cases, before any decision is made, officials will look at any indications of fraud and error comprehensively. For example, DWP will look within its own systems to check for any inconsistencies between the data received via EVM and the information the customer has provided to DWP. There could, for example, be a disregard in place, which means that a claimant can have more money than normally allowed under the benefit rules. Alternatively, a DWP staff member may reach out to the claimant to request further information. In such cases, an appropriately trained and skilled staff member will make any decisions that affect benefit entitlement or changes to a claim. The suspension of a claim would be used only as a last resort and only after repeated attempts to contact the claimant and checking for any known vulnerabilities. I hope that, in the light of that, the noble Lord is reassured and will feel able to withdraw his amendment.
Baroness Sherlock
(a) the period of 14 days beginning with—(i) the day on which the eligibility verification notice was given, or(ii) if the person seeks a review of the notice under paragraph 13, the day on which the person is notified of the outcome of the review, or(b) such longer period (if any) as the Tribunal considers reasonable in all the circumstances.”Member’s explanatory statement
This amendment means that the tribunal can extend the time limit for appealing against an eligibility verification notice.
Viscount Younger of Leckie (Con)
My Lords, I shall speak briefly to this group. For once I shall be helpful to the Government, as I rise to speak in opposition to Amendments 89A and 89B in the name of the noble Lord, Lord Sikka.
These amendments would limit the scope of Department for Work and Pensions eligibility verification powers, as we see it, so that they apply only to bank accounts held solely in the name of the benefit recipient, including joint accounts from scrutiny. I recognise the intention behind this proposal, which is to protect privacy and the financial autonomy of those sharing bank accounts with benefit claimants—the noble Lord, Lord Sikka, very eloquently set out his stall—but I respectfully argue that the amendments would create a significant and problematic loophole in the integrity of the fraud and error detection system.
Let us be clear: if these amendments were adopted, a person under investigation for suspected misrepresentation of assets or income could very easily shield those resources simply by transferring them into a joint account, potentially with a spouse, relative, or even a third party. Under the proposed wording, such an account would then fall outside the reach of the DWP’s verification powers, regardless of whether the claimant retained full control over the funds or continued to benefit from them. Perhaps the Minister can help me and the Committee in understanding how the DWP test-and-learn mechanism might have highlighted such an issue, and how it might have provided such a solution.
This is not a theoretical risk. We know from operational experience that individuals engaged in fraudulent activity will often use exactly such mechanisms to conceal income or capital. The ability to move money to a joint account is a clear weakness that could be exploited by those who—we must remember—are believed to have stolen money from the taxpayer.
Under the current drafting of the Bill, the Government rightly allow verification of accounts held by or accessible to the claimant, including joint accounts. This does not mean that third parties will have their data or finances indiscriminately accessed. There are safeguards in place. The department will not be able to view or interfere with every joint account at will, only those, as the Minister indicated earlier, where eligibility indicators suggest a relevant connection, and only where necessary to verify benefit entitlement. These powers are proportionate and targeted.
The amendments, however, would tie the hands of investigators, even where there is a clear and compelling reason to examine whether the claimant has access to or control over funds that affect their entitlement. In so doing, they would introduce a gaping loophole in the very process that is meant to protect taxpayer money and ensure fairness across the system. Let us not forget the public interest at stake here. We are talking about a welfare system that supports millions of people, but also one that must command public confidence and demonstrate that it is both compassionate and resilient to abuse. Creating a known and easily exploited blind spot, as these amendments would, risks undermining that confidence and inviting avoidable losses to fraud or error.
Moreover, this is not a question of criminalising or persecuting people who live with others or hold joint accounts for legitimate reasons. It is about ensuring that where state funds are being claimed on the basis of need, the system has a fair and proportionate—to use that word again—ability to verify the facts, including the assets and income to which the claimant may have access.
No one benefits from a system where loopholes are left open, least of all the people whom the welfare state exists to support. These amendments may be well intentioned, as I said earlier, but they would weaken the ability of the department to carry out its responsibilities effectively, and in doing so would undermine both the fairness and sustainability of the benefits system. I therefore urge noble Lords not to support these amendments. Let us uphold the principle that verification powers should be robust, proportionate and resistant to manipulation—and not inadvertently create a rule that the dishonest can use to their advantage.
Finally, I feel that I might have written a speech for the Minister, but I am sure that she will tell me that I am completely wrong and, perhaps, rebut some of my points.
Baroness Sherlock (Lab)
My Lords, I thank noble Lords, especially the noble Viscount, for doing some of my work for me; I am very grateful. I cannot support my noble friend’s amendments, but I am grateful to him because he has raised a point that people need to understand, and this Committee is exactly the right place to understand the issue.
It might be worth taking a step back. There will be two ways of getting information. We could either go to banks and say, “Here is Mr John Smith, please give us everything you know about him”, but then we would have to give personal information about the individual to the banks, which they do not have. Or we could do what we have decided to do, which is to say: “This is the account into which we pay the money. Please give us the information from that account according to these criteria”. We have gone with the second, because we will not be giving out personal information to financial institutions. However, that does have some consequences, which I will go through one at a time.
First, DWP benefits can be—indeed, are—paid into joint accounts held by one or more individuals. It is therefore essential for financial institutions to share information about joint accounts and any linked accounts that include a relevant benefit payment. Perhaps the most critical reason why we need joint accounts to be in scope of the EVM is that both pension credit and universal credit are household benefits; by that, I mean that eligibility for these benefits will depend on the circumstances of those in the household, including incomes and savings held by both account holders, not just by one individual. It is therefore vital to receive information on joint accounts.
In cases where the relevant benefit is paid into a joint account, information about both account holders and other linked accounts may be shared by the financial institution with the DWP. Again, I have explained why: it is because we cannot give out personal information about them. Once the information is shared, the DWP will then identify the benefit claimant and delete any information that is not relevant to the claim. That is made clear in the code of practice, which noble Lords have had a chance to see; this will be relevant in a moment to the points that the noble Lord made about landlords.
It is worth pausing here. Unlike previous iterations—it may be that the noble Lord is thinking back to some of those—this measure specifically excludes certain accounts from its scope: business accounts, credit card accounts, mortgage accounts, and a lot of other accounts that were previously in scope but are not anymore.
On landlords, if a benefit is paid into a landlord’s account then, yes, that will come back, but, basically, the test will then be: is the account or person a benefit claimant? If not, the information will be discarded and destroyed. Although it is possible, for the reasons I have explained, that a landlord’s account could be identified by a bank if it matches the eligibility indicators and is not a business account, the DWP can easily identify landlords having a housing benefit paid directly to them once we have received the data from a bank. The DWP will screen out these cases and disregard their data. I hope that that assures the noble Lord and that he can in turn assure those who were concerned.
The question of appointees is something that I raised under a previous iteration of this; I simply have not been able to find a way around it. Corporate appointees and businesses are excluded, but, for personal appointees, we simply have not been able to do that. Of course, the appointee’s account will have the benefit paid into it, if the benefit is relevant. The only thing you could do is exclude anyone you knew was an appointee, but then many appointees are claimants in their own right, so you simply could not do that either.
All I can say is that, by receiving from institutions, we will filter out any information that is not relevant; I hope that that will reassure the noble Lord. We are interested only in information on benefits paid by the DWP to benefit claimants; that is for them. If the appointee is holding the benefit for that individual, that is in scope—of course it is—but not if it is for other purposes; likewise goes for landlords. Those with powers of attorney will be treated in the same way as appointees. Again, if the money is for the benefit claimant and it is about that, we can look at it; if it is not, we cannot. I hope that that will reassure my noble friend and that he can withdraw his amendment.
Lord Sikka (Lab)
I thank the Minister and the noble Viscount, Lord Younger, for their illumination of, and contribution to, this issue. I am not really that convinced by their replies, to be honest. The reason is that a landlord can simply say, “I just won’t rent a property to anyone on benefits”. That way, the whole bank account—into which not just the benefit claimant’s benefit but other things go—is outside the scope of any DWP inquiry.
In time, we would notice that the amount of accommodation, especially for disabled people, had shrunk because of this piece of legislation. I think that many people would be dissuaded from becoming joint bank account holders with somebody who receives benefits for the same reason: they value financial privacy. We have to remember that this Bill is removing financial privacy only from people who are generally old, sick, disabled or unfortunate—everybody else can enjoy financial privacy. That would be the response.
So, in due course, there would be very heavy and negative social consequences. As I said earlier, the Minister can alleviate some of these by ordering banks or by creating legislation that says that the banks cannot refuse anyone a bank account. That way, many more people can have a bank account and the landlords, family members and friends may well be less likely to be subject to surveillance. This is something I will mull over for the next stage, but, for the time being, I beg leave to withdraw this amendment.
Baroness Sherlock (Lab)
My Lords, my noble friend Lord Sikka’s Amendment 90 would require the independent oversight of the EVM to be carried out by a panel of people, at least half of whom would be elected by recipients of benefits in the scope of the measure.
First, I can clarify for the benefit of the Committee that the independent person in the Bill could be an individual, a group of persons or a panel. However, in appointing the person, we want to be clear that the Government will follow the direction of the Governance Code on Public Appointments throughout the process. In accordance with that code, it is for the Secretary of State to appoint an appropriate person or persons to the role of independent overseer, as set out in Clause 75, because, as the code says:
“The ultimate responsibility for appointments and thus the selection of those appointed rests with Ministers who are accountable to Parliament for their decisions and actions”.
However, the process will be overseen by the Commissioner for Public Appointments to ensure that it is robust and fair; this is in line with precedent.
My noble friend accused us of allowing some forms of politics to invade these decisions. I must say that the Secretary of State has a track record of appointing well-respected and experienced people to review the DWP’s work, even when that kind of oversight is not required. For example, in December she appointed Liz Sayce, the former chief executive of Disability Rights UK and formerly chair of the Social Security Advisory Committee, to lead the independent review into overpayment of the carer’s allowance; she also wanted Charlie Mayfield to lead a joint DWP and Department for Business and Trade review into the factors behind the growing levels of inactivity. I can assure the Committee that we will similarly look for relevant and independent expertise in this area. Clearly, the independent reviewer will have the discretion to engage with not only benefit claimants but any other key stakeholders whom they may consider appropriate, and we do not need to legislate for them to exercise that discretion.
The review must consider the extent to which the Secretary of State has complied with the legislation and the code of practice. The independent overseer will then consider the extent to which the Government have complied with the many safeguards outlined in the legislation and the code. So, the independent review is in the interests of all those who receive a payment for a relevant benefit and will help ensure that their rights are protected.
Amendment 91A in the name of the noble Lord, Lord Vaux, would require the independent reviewer to include in their annual report any impact that the EVM may have on vulnerable persons. Although I obviously agree that the DWP needs to consider carefully the vulnerabilities that our customers may have, I do not think that this amendment is necessary given the nature of the measure and the existing safeguards, including the oversight and reporting provisions. Again, I remind the Committee that this measure will actually help some of our customers, including those who are vulnerable. We know that people make genuine mistakes; access to this important data will help us find those mistakes sooner and enable us to correct them. Detecting overpayments earlier will help prevent claimants accruing large debts to the department in cases where an overpayment is recoverable.
The key issue is that this is just a data-requiring power. It will simply require a bank to share limited information where benefit-receiving accounts meet the eligibility criteria specified in a DWP notice. The process of a bank sharing data through this measure will have no direct impact on the person’s claim of vulnerabilities. The measure is not about targeting anyone; it is about ensuring that claimants are paid the correct amount of benefit. It is only then that, under the DWP’s long-standing business-as-usual processes, people may experience changes to their benefit award—for example, where, following further inquiries, it is determined that the payment is not correct or that they do not meet the eligibility rules for the payment.
A major aspect underpinning the issues raised by the noble Lord, Lord Vaux, is a broader question as to how the DWP supports vulnerable people in those processes. Layers of support already exist in the DWP to ensure that customers who are vulnerable or have complex needs have the right support put in place. DWP staff regularly conduct vulnerability checks and are proactive on this; when we do identify vulnerable individuals, we ensure that they receive the necessary support and adjustment. We have specially trained staff to support our most vulnerable customers, and they have access to a wide range of guidance to support them. Across our various benefits and services, colleagues record any support needs provided by the customer to ensure that, whenever a claimant speaks to the DWP, it is aware of how best to help them. As I have already set out, in cases of fraud and error, a DWP staff member will be the one making decisions affecting benefit entitlement.
Finally, I remind the Committee that the independent reviewer will report annually on how the powers have been exercised in line with the legislation and how effective they have been at identifying incorrect payments. They will be able to cover any issues they deem relevant, including the impacts the measure is having and what that means for DWP customers. Asking the independent reviewer to assess impacts on vulnerability would, by necessity, take the scope of the review far broader than the EVM, as it would need to focus on wider parts of DWP business. To accept this amendment would therefore fundamentally change the scope of the annual review.
Lastly, I understand what the noble Lord, Lord Vaux, is trying to achieve with Amendment 91B, but I do not believe it is necessary. The legislation already allows the Secretary of State to disclose information to the independent reviewer for the purpose of the reviews under new Section 121DD, and I assure the noble Lord that the DWP will of course work openly and collaboratively with the independent reviewer. We will provide them with the information requested and work with them to help identify the information they need to complete their review, sharing this under the existing provisions.
Should any incentive be needed, if the independent reviewer did not consider that they had received all the information they needed, the report they published and laid before Parliament would no doubt reflect this. It would be clear for Parliament to see and scrutinise it and hold the Government to account on it. However, I am confident that that situation will not arise because our deterrent will be quite enough. Nevertheless, to provide further assurance to the Committee that the Secretary of State will provide everything relevant, I am happy to commit to make this clear in the code of practice for the measure, but I would rather not legislate unnecessarily.
To close, I know that the noble Lord knows that the inclusion of this oversight matters to the whole Committee; it matters to me as much as it matters to him. The Government have not resisted calls for transparency and have a strong track record of working openly with independent reviewers, such as the independent review of carer’s allowance overpayments.
Since the noble Lord, Lord Vaux, mentioned that Amendment 91B is his final amendment, I want to say that I very much take his amendments in the constructive spirit in which they are intended. This is what the House of Lords Committee is for—to make sure that we pursue the aims of the Bill and that we do so in the most constructive and appropriate way possible. I look forward to carrying on engaging with him. For now, I hope that my noble friend Lord Sikka, whom I am sure I will see in future, will feel able to withdraw his amendment.
Lord Sikka (Lab)
My Lords, I am very grateful to the Minister and the noble Viscount, Lord Younger, for their contributions. The argument that something is costly and timely has been made for centuries against universal suffrage, but somehow we overcome that objection and recognise that people can be elected on to all sorts of bodies. In the rest of Europe, workers are elected on to company boards; nobody said that is costly and time-consuming. Perhaps we are yet to catch up with that kind of democratic revolution.
Regarding the cost, I understand the point made, but what has not been asked is: what is the cost of not doing it? There is also a cost associated with not doing something—in this case, not bringing the direct experience of those impacted by this legislation: those whose lives may be ruined, who may be named and shamed in the neighbourhood, who may perhaps end up losing somewhere to live or who cannot buy food or anything. There is a huge social cost that is basically being ignored. The cost of not doing it is more injustice and more exclusion.
Of course, if the Government want to reach a halfway solution, they could bring the NGOs and civil society organisations representing the disabled, poor, old and sick into this review, but that is not what I think I heard from the Minister—although I hope that, in time, that will be thought through again. Nevertheless, I wanted to fly the flag for democracy and public accountability. For the time being, I beg leave to withdraw my amendment.
Public Authorities (Fraud, Error and Recovery) Bill
Baroness Sherlock ExcerptsWednesday 11th June 2025
(1 week, 5 days ago)
Grand CommitteeRead Full debate Public Authorities (Fraud, Error and Recovery) Bill 2024-26 View all Public Authorities (Fraud, Error and Recovery) Bill 2024-26 Debates Read Hansard Text Read Debate Ministerial Extracts Amendment Paper: HL Bill 96-III Third marshalled list for Grand Committee - (10 Jun 2025)
Baroness Sherlock
(a) the period of 28 days beginning with the day after the day on which the liable person was notified of the outcome of the review, or(b) such longer period (if any) as the Tribunal considers reasonable in all the circumstances.”Member’s explanatory statement
This amendment means that the tribunal can extend the time limit for bringing an appeal in relation to a deduction from earnings order.
Baroness Sherlock
(a) the period of 28 days beginning with the day after the day on which the person is given the penalty notice, or(b) such longer period (if any) as the appropriate court considers reasonable in all the circumstances.”Member’s explanatory statement
This amendment means that the tribunal or court hearing an appeal against a penalty imposed by the Minister for the Cabinet Office under Chapter 5 of the Bill (penalty relating to fraud or penalty for failing to comply with requirements) can extend the time limit for the bringing of that appeal.
Public Authorities (Fraud, Error and Recovery) Bill
Baroness Sherlock ExcerptsThursday 15th May 2025
(1 month, 1 week ago)
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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?
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.
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.
Autism Employment Review
Baroness Sherlock Excerpts(1 month, 1 week ago)
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Lord Touhig (Lab)
My Lords, in begging leave to ask the Question standing in my name on the Order Paper, I declare my interest as a vice-president of the National Autistic Society. That is an honour I share with my friend—the noble Baroness, Lady Browning—from the Opposition Benches, who is not with us this afternoon as she is in the Select Committee looking at the working of the Autism Act.
The Parliamentary Under-Secretary of State, Department for Work and Pensions (Baroness Sherlock) (Lab)
My Lords, the independently led Buckland Review reported to the previous Government with recommendations aimed primarily at employers. This Government are committed to raising awareness of neurodiversity and have launched an independent panel of academics with expertise in and experience of neurodiversity to advise us on boosting neurodiversity awareness and inclusion at work. The panel will consider the reasons why neurodivergent people have poor experiences in the workplace and a low overall employment rate, and will make its recommendations to employers and government in the summer.
Lord Touhig (Lab)
My Lords, when asked in the other place about progress in implementing the Buckland Review of Autism Employment, my honourable friend Alison McGovern said that she preferred the term “neurodiversity” as it is “more inclusive”. Neurodiversity is very broad, whereas autism is a specific condition. Will my noble friend the Minister think again and perhaps reassure the House that this umbrella term will not be used when responding to the review? There is a danger that the needs of autistic people will be overlooked, and I have the permission of the noble Baroness, Lady Browning, to tell the House that she shares that concern. Robert Buckland’s review is specifically about the employment of people with autism—full stop.
Baroness Sherlock (Lab)
My Lords, I thank my noble friend for that question and commend him for his work in this area. The Buckland Review reported to the previous Government, who did not formally respond, but most of the review’s recommendations were to employers. Several recommendations relating to government are being progressed, including working with employers to reform Disability Confident.
I think my honourable friend the Minister for Employment was signalling that this Government have broadened their focus to address employment barriers for all neurodivergent people, specifically including those with autism, while recognising that many people have more than one condition. Our academic panel is reviewing the evidence, recommendations and insights from the Buckland Review, so that they do not get lost. I understand the fear that my noble friend is expressing, but it might reassure him to know that the panel specifically includes expertise on autism. Although this Government will not respond specifically to the previous Government’s report, the Minister for Employment, Alison McGovern, alongside the Minister for Social Security and Disability, met Sir Robert Buckland to discuss his work. Professor Amanda Kirby, chair of the academic panel, recently met Sir Robert to discuss its scope and plans, and he was supportive of the way that the panel would build on the work he initiated. I hope that reassures my noble friend.
Lord Sterling of Plaistow (Con)
My Lords, first, I have an autistic grandson. He is at a very difficult period of life. I know from old that the Minister has a deep feeling for and understanding of the problems of it. The noble Lord, Lord Touhig, and I have worked together for many years and there are two things I want to make quite clear. First, autism is not a “neurodisease”, autism is autism. Secondly, from my own experience, autistic people have the most brilliant minds when they have the opportunity to be cared for correctly. Will the Minister, as usual, throw everything behind what is needed to help autistic youngsters?
Baroness Sherlock (Lab)
I am grateful to the noble Lord. His grandson has a good champion in him, and I hope he can understand that. The noble Lord makes a really important point. The employment rate for people with autism was 31%. If you compare that with disabled people across the board at 55%, it is not good. That shows the extent of the problem. We recognise that this is extremely serious. Nothing in the way this Government are going about this is trying in any way to minimise the challenges faced by people with autism.
I take the noble Lord’s point: autism is not a disease, but it is a different way of learning and looking. That is true of many neurodivergent conditions, and there are things that can be learned. We have pulled together a panel with different kinds of expertise, not to create some generalised view on what it feels like to not think in the way that some other people think but to enable us to look at all the evidence and work with employers to try to make a better place for everybody to go out there and work. I hope the noble Lord will be reassured by that.
Lord Addington (LD)
My Lords, will the Minister give us a further assurance that when the Government use the term “neurodivergence”, it is a broad spectrum, and you cannot help somebody with neurodivergence? You might be able to help somebody with dyslexia, autism or dyscalculia, for instance. I remind the House of my interests. There have to be specific help pathways for those conditions. If we start trying to be too general, we will end up helping no one.
Baroness Sherlock (Lab)
I am grateful to the noble Lord for highlighting some of the conditions. It may reassure him to know that the academic panel we have pulled together is looking at a number of specific neurodivergent conditions. Those include ADHD, autism spectrum condition—with the acknowledgments made—dyslexia and dyscalculia. They also include DCD—developmental co-ordination disorder, also known as dyspraxia—and developmental language disorder, among other conditions. The noble Lord is absolutely right. The job of the panel is to review what is known and then to look at what can help. There will be some things, some steps employers could take, which may be of benefit to people with more than one condition, but there are some that will be quite specific, and we need to understand the evidence before we can make good recommendations.
Baroness Uddin (Non-Afl)
My Lords, I agree with my noble friend Lord Touhig in his entire assessment of how different it is for autism and neurodivergent issues. I declare that I have an autistic son who is 44 years old. I just came back from a meeting chaired by Samantha Niblett MP on this specific subject of underemployment and employment of people with autism. I agree with the Minister that the gap is unacceptable, but what are the Government doing to ensure that job coaches, in particular those of the DWP, are attuned to their needs and directing them properly?
Baroness Sherlock (Lab)
The noble Baroness makes a really good point. There are a number of different forms of support available to people with a range of disabilities or other conditions, if they come forward. Our job coaches have extensive training in a wide range of conditions to work with people who come in who need help, but there are also all kinds of schemes available. We can refer people to different kinds of help, to programmes where they can get voluntary support and work with whatever their particular needs are. We are trying to make our service out there increasingly tailored. There is not a generic range of barriers to employment. People often need quite specific understanding of what is getting in their way and help to overcome it. I hope that, in time, if the noble Baroness’s son ever comes to a jobcentre, he will find the help he needs, if, indeed, he needs it.
Baroness Stedman-Scott (Con)
My Lords, I declare I have a great-nephew, Ollie, who is autistic and in a special school, and we love him to bits. Every grandparent, every parent, every great-aunt, worries about how their relative is going to get a job. I recently visited Project SEARCH run by the DFN Foundation, and I can tell the House that it has a 70% success rate of getting autistic young people into work, and 60% of them are in a full-time job. Are His Majesty’s Government going to set ambitious targets such as that, so that we get as many people into work as possible and they can lead productive lives? If the Minister would like a day out of the office, I will take her to Project SEARCH myself to see it in action.
Baroness Sherlock (Lab)
Well, that is an offer I cannot refuse. When I used to work with families with children, there was a saying that every child deserves to have at least one adult unreasonably committed to their flourishing. In this House, I think those adults are particularly ever-present, and I can imagine that Ollie is not only being loved to bits but supported.
I completely agree with the noble Baroness. One of the challenges for us in supporting people who have disability barriers to work is that we have to have confidence that people can be supported and helped to get work, because if we do not believe they can, why should anyone else? If we do not believe it is possible, why should employers take a chance on people and why should individuals have confidence in themselves? We have seen great results with supported employment. Start where somebody is, look at the barriers, think about what they might be able to do and support them into it. Some people will be happy with supported employment. Either someone is at risk of falling out of a job or we can get them into it and, once they are in, can we help them to stay there? I would be delighted to go with the noble Baroness to visit that project but let us talk about this some more.
Lord Spellar (Lab)
My Lords, I recognise the danger that has been pointed out. If you move from the specific to the general, you often lose focus. But do we not have a broader problem? Millions of our fellow citizens are unemployed or underemployed. Meanwhile, we have a load of artificial barriers in not just the private sector but local and national government departments, about people’s conditions, previous criminal records, often from decades past, irrelevant qualifications and boxes being ticked—with employers therefore not looking at people’s potential. Is that not the broader issue and one that the Government need to take on, for individuals and the wider economy and wider society?
Baroness Sherlock (Lab)
My Lords, those are excellent points. We want to help individuals see their own potential and help employers see the potential in everyone who comes in. I am answering questions today, but I am also the Minister in the DWP who is responsible for working with ex-prisoners, ex-offenders and people who have experience of homelessness. Similar patterns happen across the piece. Some of our programmes addressing people’s challenges if they have disabilities or health conditions are also available to people with other barriers, such as having been an offender or having been homeless. The first step is to help people overcome those. We do a lot of work in this space already. I have visited some fantastic programmes which have great success rates. We are committed to doing this. Let us all have confidence. People can achieve anything if someone gets behind them.
Pension Protection Fund and Occupational Pension Schemes (Levy Ceiling) Order 2025
Baroness Sherlock Excerpts(2 months ago)
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The Parliamentary Under-Secretary of State, Department for Work and Pensions (Baroness Sherlock) (Lab)
My Lords, I thank my noble friend Lord Davies of Brixton for introducing this debate and all noble Lords who have contributed. I am particularly grateful to the noble Lord, Lord Palmer, for trying to call us back—however unsuccessfully—to debating the order on the Order Paper. The serious side of that, I am afraid, is that rarely will a Minister have been able to so profoundly disappoint so many people, on almost all fronts, in one single—I hope relatively brief—speech.
My noble friend has every right to want a general debate on this otherwise rather harmless order, but the timing of this debate means that I am not in a position to answer most of the questions that noble Lords asked. I suspect that they will not be surprised by that, even if they are disappointed. The reality, as I will explain, is that we are poised on a number of fronts to make both decisions and announcements in a timespan ranging from the near future to the coming months, so noble Lords will not have to hold their breath too long—but I fear they must do so just a little longer.
Just for the sake of order, I call your Lordships back briefly to what we are debating today. The levy ceiling order 2025 sets out the maximum amount that the Pension Protection Fund can collect from eligible schemes through its annual levy. It is worth briefly pausing to note that we are in the 20th anniversary year of the PPF. I know that some noble Lords were celebrating this not so long ago, when there was much talk of the comment made by Andrew Smith, the Secretary of State who oversaw its creation. He famously asked
“why, if people expect their holiday provider or motor insurer to be covered if the firm goes bust, there is no cover for something as important as an occupational pension”.—[Official Report, Commons, 11/6/03; col. 683.]
Looking back now, it is hard to believe that we did not have something like this then, but we do now and some of the people in this Room were behind us getting to this point. I commend that.
Before the PPF was established, if a DB scheme failed, of course, its members were at significant risk of losing their pensions and facing an uncertain retirement. I think that, from the comments today, we can all agree that, over the years, the PPF has built up a strong reputation, is respected by stakeholders and enjoys high levels of customer satisfaction. As we have heard in part, the PPF is primarily funded by a levy paid by eligible pension schemes over the years, but also by recoveries from insolvent employers, assets from failed pension schemes and returns on its investments. My noble friend Lady Drake made an important point about the shifting balance of both the source of those finances and how we look at that going forward.
To ensure that the PPF remains affordable, and to reassure levy payers, originally three constraints were placed on how the board sets the levy for each financial year: that it cannot be increased by more than 25% of the previous year’s levy; that the levy ceiling will set the maximum levy that the board can collect; and that at least 80% of the levy must be risk-based. The levy ceiling is uprated annually in line with earnings, the point of which is to ensure that it broadly aligns with the PPF’s potential liabilities. This financial year, the ceiling has been increased to approximately £1.4 billion, while the levy estimate is just £45 million. Of course, that increasing gap between the ceiling and the estimate reflects the fund’s strong financial position. As the PPF matures, it is reducing its dependence on the levy for funding and becoming more reliant on returns from its investments. That marks a significant step in the PPF’s journey towards long-term sustainability and financial resilience, ensuring that it can protect its members into the future. My noble friend Lord Davies made a point about how far that responsibility stretches—there will be members who will need support from the fund for many years to come.
I turn to points raised by noble Lords, in no particular order. The noble Viscount, Lord Younger, asked several important broad questions about the Government’s pensions strategy. To answer the last question first, he asked how the Government will ensure that authorities in the Local Government Pension Scheme have the right fiduciary expertise to invest in local infrastructure. The answer is that we will require LGPS administering authorities to work with strategic authorities to identify local investment opportunities suitable for pension funds. All 86 authorities will be required to delegate the management of their investments to pools regulated by the FCA, and that approach will create large pools of professionally managed capital, aligning with international best practice. These pools will be responsible for conducting due diligence on local investment proposals and deciding whether to invest. That ensures that investment decisions are taken by those with the appropriate professional expertise, and it will free up local pension committees to focus on developing their investment strategies.
The noble Viscount also asked how the PPF and DWP will work together to respond effectively to emerging challenges and opportunities—a point also raised by my noble friend Lord Davies. Here, both noble Lords were right to refer to the 2022 departmental review of the PPF led by Lesley Titcomb. Its recommendations have really helped to shape the way the PPF and the department have worked together to ensure that scheme members are protected into the future.
The noble Viscount asked the $64,000 question about recommendation 18 relating to the pension protection levy, a point raised, I think, by everybody—tutti. We announced back in January that we will give the PPF board greater flexibility to adjust the levy by removing the restriction that the levy cannot be increased beyond 25% on the previous year. That will enable the board not to collect a levy when it is not needed, thereby reducing costs for levy payers and potentially freeing up millions of pounds for investment. I hope that this will be broadly welcomed in the streets, if not just in Grand Committee.
This will require legislation. I am sorry to say to the noble Viscount and, indeed, the Committee that I am not in a position yet to confirm the legislative vehicle through which it will be delivered, but I assure him that we will legislate when parliamentary time allows. We will continue to work with the PPF to consider the reserve and ensure the fund’s resilience. That sounds like a terrible bit of government “I’m not going to tell you”, but the reality is that, as anyone who has been a Minister knows—that is at least two noble Lords in the Committee—there are clear protocols about the point at which Ministers are able to indicate whether parliamentary time has been approved, and there are things we have go through before we are in a position to do that. But, as soon as it is possible to inform Members, I will be very glad to do so.
More broadly, we continue to monitor the DB pension scheme landscape as it evolves. The noble Viscount asked whether we disagreed with any of the recommendations from the review, and the answer is that we do not. Some of them will be reflected in the upcoming pensions Bill, but many of them do not require legislation through the pensions Bill or anything else. Some have been overtaken by events and the department is working on some of them with the PPF to explore either them or related options.
Noble Lords, in particular the noble Baroness, Lady Altmann, referred to the reality that the universe of DB schemes is maturing and will become smaller over the next decade as well-funded schemes secure their legacy liabilities in the commercial market or choose to run on. She mentioned some of the implications of that. I assure her that DWP is working with the Treasury to better understand the implication of emerging market trends. Alongside the PPF, we continue to review whether further structural changes are needed to ensure that the pension protection levy remains aligned with the various schemes that the PPF protects.
PIP Changes: Impact on Carer’s Allowance
Baroness Sherlock Excerpts(2 months, 3 weeks ago)
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Baroness Stedman-Scott (Con)
My Lords, I am sure that all noble Lords will agree that carers provide vital services and support to those who desperately need them. The speculation, leaks and briefings have spread fear, anxiety and distress among the most vulnerable about cuts to benefits, particularly for carers. How will His Majesty’s Government ensure that clear, effective and timely communication gets to those who will lose benefits and those who will not? What help and assistance will be provided to those who have had the cruellest of times as a result of this rushed decision?
The Parliamentary Under-Secretary of State, Department for Work and Pensions (Baroness Sherlock) (Lab)
My Lords, the one thing we can definitely agree on is that we support carers. We are grateful for the work they do. Society has reason to be grateful for the work they do. This Government have supported them. We have shown that by, for example, boosting the carer’s allowance earnings threshold by £45 a week to the highest level it has ever been since the benefit was created in the 1970s, benefiting more than 60,000 carers by 2029-30. The Government are making necessary changes to stem the rising costs and reform the focus of our sickness and disability benefits system. Those changes will affect some people on carer’s allowance.
The noble Baroness need not worry about reading leaks. All the details are set out in the Green Paper, which I commend to her as a good read for this evening, perhaps before she goes to bed. We are deliberately setting out to consult on how we can support those affected by any of the measures in it. I assure her that nothing will happen overnight. No one is going to lose their benefits overnight. Even when the new changes come in, nobody will lose their benefits until there has been a full and individual assessment of their personal circumstances.
Lord Laming (CB)
My Lords, I am sure the Minister will agree that our society, with an ageing population and keeping people with profound disabilities alive, is increasingly dependent on carers. Can the Minister assure the House that nothing will be done that will undermine the value we attach to carers’ responsibilities and make them feel that our society does not value them as a whole?
Baroness Sherlock (Lab)
I thank the noble Lord for that excellent question. I reiterate our absolute appreciation of the work that is done by both paid and unpaid carers. We are very conscious of the fact that, as a country, we have not been able to sort out the problems in our social care system. Adult social care has put extra pressure on to unpaid carers, which is one of the reasons—a clear reason—why we have asked the noble Baroness, Lady Casey, to produce a report by next year on the medium-term challenges, so that we can try to get a long-term fix by 2028. In the short term, I hope that carers will be reassured by the investment the Government are making to, for example, allow them, for the first time ever, if they are working alongside caring, which many are, to earn the equivalent of 16 hours at the national minimum wage before losing any of their benefit.
Lord Palmer of Childs Hill (LD)
My Lords, forgive me if some of the statements and replies are confusing to me. Something is said in one place and something is said in another. Can the Minister tell us why, in the debate that followed her Spring Statement last week, the Chancellor said that the Government were providing “additional support for carers”, when they are actually reducing carers’ benefits spending by £500 million by 2029-30? The statements and replies are confusing.
Baroness Sherlock (Lab)
My Lords, there is confusion, but I do not think it is the Chancellor who created it. I have heard a suggestion that carers’ benefits are being cut. Let me be clear: carers’ benefits are not being cut. Carer’s allowance will rise to £83.30 from next week, or the end of this week, and the Government have boosted the earnings threshold in carer’s allowance by the highest ever amount.
Secondly, reforms are being made to disability and sickness benefits. One of the consequences of those is to change some of the people who currently are entitled to the personal independence payment. Because carer’s allowance is paid to people who care for someone on personal independence payment, there will be some people currently getting carer’s allowance for whom there may not be an entitlement in future.
We spelled out clearly in the Green Paper that we would look at how we could support those who are losing entitlement in general as well as, specifically, carers who are losing entitlement. I want people to be clear: we are not cutting the value of the benefit; we are not changing the fact that they can earn more—but there will be some people who are getting carer’s allowance now, and who might have got it in the future, who will not get it. However, given the rate at which the PIP case load is growing, with all the changes that we are making we are stemming the rate at which spending on sickness and disability benefits goes up, not cutting it.
Baroness Lister of Burtersett (Lab)
My Lords, at the very end of the Green Paper, in an annexe, is, I believe, the one and only reference to the impact of the personal independence payment cuts on unpaid carers. It says:
“The government will consider the impacts on benefits for unpaid carers as part of its wider consideration of responses to the consultation as it develops its detailed proposals for change”.
As the impact on carers is not included in the list of questions for consultation, can my noble friend the Minister explain exactly how the Government propose to consult on it? Are we talking about anything more than possible transitional protection?
Baroness Sherlock (Lab)
My Lords, I cannot tell my noble friend at this stage what it will be, both because we are listening to the wider views and because we are going to take our time to work this through. To be clear, we specifically said in the Green Paper that we would look at the impact on carers and look at ways in which we could support carers who might find themselves losing entitlement to carer’s allowance.
To give a sense of timescale, assuming that Parliament approves the primary legislation that will bring about these changes to disability and sickness benefits, the changes to PIP that will affect carer’s allowance will not come in until November 2026. Only after that will somebody who is getting PIP at the moment see their entitlement change. It will be only as and when they are called to a review and their own circumstances are reviewed that their entitlement changes, which could in turn affect carer’s allowance. So I am confident that we have plenty of time available to us to work through the way in which we can support those who will lose out as a result of these changes.
Baroness Browning (Con)
My Lords, will the Minister explain how the Government will approach what is an increasing number of households, particularly as people get older, where you have two people in a household, both with some level of incapacity and one in receipt of PIP, who may lose it? How will the Government assess the carer who has health issues and get a balance that recognises that, for those two people living together, there is a level of support between the two? Remove the finance from one of them and you affect two people.
Baroness Sherlock (Lab)
The noble Baroness is right. There are cases—unusual cases—where both members of a couple are entitled to sickness or disability benefits, and even cases where both are getting carer’s allowance to care for each other. I do not know how many such cases there are. For that to work, each party would have to be sufficiently sick or disabled to be entitled to PIP, and would have to lose it, and each would also have to be able to provide at least 35 hours’ unpaid caring work a week. It is not that such circumstances are not there, but the interaction of different parts of our benefit system is complex, which is why we want to take our time to work through the impacts on various circumstances.
Baroness Brinton (LD)
Will the Minister explain the interrelationship between the DWP and the Department of Health and Social Care? Many unpaid carers are unable to work because of the many hours of care they provide. If they lose their carer’s allowance they will have to return to work, which will mean that the disabled people they care for have to have care provided by the state. Does the Minister have any figures to hand?
Baroness Sherlock (Lab)
Some people get carer’s allowance—I know the noble Baroness understands this, but this is for the benefit of the House—while others will have a carer’s element in universal credit, and that automatically means they are not expected to be available to work. However, I assure her that work coaches can adjust conditionality in individual cases, taking account of the caring responsibilities, even if the carer’s element is not paid. Again, we will look at this as part of our consideration of the impacts.
Baroness Andrews (Lab)
My Lords, I am grateful to the Minister for what she has said. I would expect nothing less from our Government than support for unpaid and paid carers. Exactly what arrangements are being made for consultation with unpaid carers? They are an inchoate and ununionised bunch, although there are many admirable charities. In a related question, what are the latest figures for the assessment of carers who are still falling into the trap of unwittingly working too many hours and therefore are still being penalised by DWP? We were told that the Government were acting on that.
Baroness Sherlock (Lab)
My Lords, those are two important questions. I know we are working up the consultation process at the moment. That process will not start until we publish all the versions of the Green Paper in early April, including the accessible versions, but we are holding public events in person and virtually, as well as being open to written responses. I will make sure that we are open specifically to comments from unpaid carers.
On the question of overpayments and carer’s allowance, my noble friend may be aware that we have started an independent review into carer’s allowance overpayments, which will conclude this summer. It is being led by Liz Sayce, who brings enormous experience as a former Disability Rights UK chief executive and now a visiting professor in practice at the LSE. The review is specifically focusing on carer’s allowance overpayments. We are trying to work through the questions of how to manage that at the moment and whether there is there any way to reform the system to stop this happening in future.
Welfare Reform
Baroness Sherlock Excerpts(3 months ago)
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The Parliamentary Under-Secretary of State, Department for Work and Pensions (Baroness Sherlock) (Lab)
My Lords, with the leave of the House, I shall repeat a Statement made earlier today in the other place by my right honourable friend the Secretary of State for Work and Pensions. The Statement is as follows:
“Mr Speaker, this Government are ambitious for our people and our country, and we believe that unleashing the talents of the British people is the key to our future success. But the social security system we inherited from the Conservatives is failing the very people it is supposed to help and is holding our country back.
The facts speak for themselves. One in 10 people of working age are now claiming a sickness or disability benefit. Almost 1 million young people are not in education, employment or training—that is one in eight of all our young people. Some 2.8 million are out of work due to long term sickness, and the number of people claiming personal independence payments is set to double this decade from 2 million to 4.3 million, with the growth in claims rising faster among young people and those with mental health conditions. Claims are up to four times higher in parts of the Midlands, Wales and the north where economic demand is weakest. These places were decimated in the 1980s and 1990s, written off for years by successive Tory Governments and never given the chances that they deserved.
The consequences of this failure are there for all to see. Millions of people who could work are trapped on benefits, denied the income, hope, dignity and self-respect that we know good work brings. Taxpayers are paying millions more for the cost of failure, with spending on working-age sickness and disability benefits up £20 billion since the pandemic and set to rise by a further £18 billion by the end of this Parliament to £70 billion a year. It is not like this in most other comparable countries, where spending on these benefits since the pandemic is either stable or falling, while ours continues to inexorably rise. This is the legacy of 14 years of Tory failure.
Today we say, ‘No more’. Since we were elected, we have hit the ground running to get more people into good work through our plan for change. We are investing an extra £26 billion into the NHS to drive down waiting lists and get people back to health and back to work. We are improving the quality of work and making work pay with our landmark employment rights legislation and increases in the national living wage; we are creating more good jobs in every part of the country in clean energy and through our modern industrial strategy; and we are introducing the biggest reforms to employment support in a generation, with our £240 million Get Britain Working plan. Today, our Pathways to Work Green Paper sets out decisive action to fix the broken benefits system, creating a more proactive, pro-work system for those who can work and so protecting those who cannot work, now and for the long term.
As a constituency MP for 14 years, I know that there will always be people who can never work because of the severity of their disability or illness. Under this Government, the social security system will always be there for people in genuine need. That is a principle we will never compromise on. But disabled people and people with health conditions who can work should have the same rights, choices and chances to work as everybody else. That principle of equality is vital too, because, far from what Members opposite would have you believe, many sick and disabled people want to work, with the right help and support. Unlike the Conservatives, that is what we will deliver.
Our first aim is to secure a decisive shift towards prevention and early intervention. Almost 4 million people are in work with a work-limiting health condition, and around 300,000 fall out of work every year, so we have to do far more to help people stay in work and get back to work quickly—because your chances of returning are five times higher in the first year. Our plans to give statutory sick pay to 1 million of the lowest-paid workers and more rights to flexible working will help keep more people in work.
The WorkWell programme is trialling new approaches, such as GPs referring people to employment advisers instead of signing them off as sick. Our “Keep Britain Working” review, led by former John Lewis boss Sir Charlie Mayfield, will set out what government and employers can do together to create healthier, more inclusive workplaces. So we will help more employers offer opportunities for disabled people, including through measures such as reasonable readjustments, alongside our Green Paper consultation on reforming Access to Work so it is fit for the future.
Today I can announce another step: our Green Paper will consult on a major reform of contributory benefits, merging contributions-based jobseeker’s allowance and employment support allowance into a new, time-limited unemployment insurance, paid at a higher rate, without having to prove you cannot work in order to get it. So if you have paid into the system, you will get stronger income protection while we help you get back on track.
Our second objective is to restore trust and fairness in the benefits system by fixing the broken assessment process and tackling the perverse incentives that drive people into welfare dependency. Members on this side of the House have long argued that the work capability assessment is not fit for purpose. Going through the WCA is complex, time-consuming and often stressful for claimants, especially if they also have to go through the PIP assessment. More fundamentally, it is based on a binary can/cannot work divide, when we know the truth is that many people’s physical and mental health conditions fluctuate.
The consultation on the Conservatives’ discredited WCA proposals was ruled unlawful by the courts, so today I can announce that we will not go ahead with their proposals. Instead, we will scrap the WCA in 2028.
In future, extra financial support for health conditions in universal credit will be available solely through the PIP assessment, so extra income is based on the impact of someone’s health condition or disability, not on their capacity to work—reducing the number of assessments that people have to go through and a vital step towards derisking work.
We will do more by legislating for a right to try, guaranteeing that work in and of itself will never lead to a benefit reassessment, giving people the confidence to take the plunge and try work without the fear that this will put their benefits at risk.
We will also tackle the perverse financial incentives that the party opposite created, which actively encourage people into welfare dependency. The Tories ran down the value of the universal credit standard allowance. As a result, the health top-up is now worth double the standard allowance, at more than £400 a month. In 2017, they took away extra financial help for the group of people who could prepare for work, so we are left with a binary assessment of can or cannot work and a clear financial incentive to define yourself as incapable of work—something the OBR, IFS and others say is a likely factor driving people on to incapacity benefits.
Today, we tackle this problem head on. We will legislate to rebalance the payments in universal credit from April next year, holding the value of the health top-up fixed in cash terms for existing claimants and reducing it for new claimants, with an additional premium for people with severe, lifelong conditions that mean they will never work, so to give them the financial security they deserve.
Alongside this, we will bring in a permanent, above-inflation rise to the standard allowance in universal credit, for the first time ever—a £775 annual increase, in cash terms, by 2029-30, and a decisive step to tackle the perverse incentives in the system.
We will also fix the failing system of reassessments. The Conservatives failed to switch reassessments back on after the pandemic, so they are down by more than two-thirds, with face-to-face assessments going from seven in 10 to only one in 10. We will turn these reassessments back on at scale and shift the focus back to doing more face to face, and we will ensure that they are recorded as standard to give confidence to claimants and taxpayers that they are being done properly.
I can also announce that, for people on universal credit with the most severe disabilities and health conditions that will never improve, we want to ensure that they are never reassessed, to give them the confidence and dignity they deserve. We will fundamentally overhaul the DWP’s safeguarding approach to make sure that all our processes and training are of the highest quality, so we protect and support the most vulnerable people.
Alongside these changes, we will also reform disability benefits so that they focus support on those in greatest need, and to ensure that the social security system lasts for the long term, into the future.
Social and demographic change means that more people are now living with a disability, but the increase in disability benefits is double the rate of increasing prevalence of working-age disability in the country, with claims among young people up 150%; for mental health conditions up 190%; and for learning difficulties up over 400%—according to the IFS. Every day, there are more than 1,000 new PIP awards. That is the equivalent of adding a population the size of Leicester every single year.
That is not sustainable in the long term, above all for the people who depend on this support, but the Tories had no proper plan to deal with it, just yet more ill-thought-through consultations. So today I can announce that this Government will not bring in the Tory proposals for vouchers, because disabled people should have choice and control over their lives. We will not means-test PIP, because disabled people deserve extra support, whatever their income, and I confirm that we will not freeze PIP either.
Instead, our reforms will focus support on those with the greatest needs. We will legislate for a change in PIP so that people will need to score a minimum of four points in at least one activity to qualify for the daily living element of PIP from November 2026. This will not affect the mobility component of PIP and relates only to the daily living element.
Alongside this, we will launch a review of the PIP assessment, led by my right honourable friend the Minister for Social Security and Disability, in close consultation with disabled people, the organisations that represent them and other experts, so we make sure that PIP and the assessment process are fit for purpose now and into the future. This significant reform package is expected to save over £5 billion in 2029-30, and the OBR will set out its final assessment of the costings next week.
Our third and final objective is to deliver personalised support to sick and disabled people who can work to get the jobs they need and deserve. We know from the last Labour Government and our new deal for disabled people, young people and the long-term unemployed the difference that proper employment support can make. More recent evidence from the Work Choice programme and additional work coach time shows that support can make a significant difference in the number of people getting and keeping work and improving their mental health and well-being.
This Labour Government believe that an active state can transform people’s lives. We know this because we have done it before. So today I can announce that we will invest an additional £1 billion a year in employment support, with the aim of guaranteeing high-quality, tailored and personalised support to help people on a pathway to work—the largest ever investment in opportunities to work for sick and disabled people. Alongside this, for those on the UC health top-up, we will bring in an expectation to engage and a new support conversation to talk about people’s goals and aspirations, combined with an offer of personalised health, skills and employment support.
Because being out of work or training when you are young is so damaging to your future prospects, we will go further. In addition to funding our youth guarantee through the £240 million Get Britain Working plan, we will consult on delaying access to the health top-up in universal credit until someone is aged 22, with the savings reinvested into work support and training opportunities, so that every young person is earning or learning and on a pathway to success.
The Conservatives left a broken benefits system that is failing the people who depend on it and our country as a whole. The status quo is unacceptable, but it is not inevitable. We were elected on a mandate for change: to end the sticking-plaster approach and tackle the root causes of problems in this country that have been ignored for too long. We believe in the value and potential of every single person and that we all have something positive to contribute and can make a difference, whether that is in paid work, in our families or in our communities alongside our neighbours and friends. We will unleash this potential in every corner of the land, because we are as ambitious for the British people as they are for themselves. Today we take decisive action, and I commend this Statement to the House.”
Lord Palmer of Childs Hill (LD)
My Lords, these welfare reforms aim to reduce benefit spending while encouraging greater workforce participation. I thank the Minister for reading the Statement and the noble Viscount for the useful questions that he has raised. I have respect for both of them, as they know.
From these Benches, we want to see more people in work, including those with disabilities. While the need for reform is clear, the Liberal Democrats are concerned that the current proposals risk worsening the very issues that they intend to address. We all want to see a more efficient welfare system, but that cannot come at the expense of the most vulnerable in society, particularly those with disabilities or health conditions. Instead of focusing on short-term cuts, we must reform the system in a way that is fair and compassionate and ensures dignity for all.
Does the Minister agree that one of the main aims of this reform package is, as the Statement says, to save £5 billion—often at the expense of the vulnerable in society?
One key area of concern are the proposed cuts to benefits for people with disabilities, which could push many into poverty and greater dependence on social care. The chief executive of Citizens Advice has warned that these changes could have “serious long-term consequences”, and we on these Benches passionately agree. For individuals with severe disabilities or health conditions, this reform package may well create further barriers to employment rather than removing them. The Government’s proposal to freeze the health top- up in universal credit for existing claimants, while reducing it for new ones, will only add to the pressure on disabled individuals, undermining their ability to achieve independence and security. Why are new claimants considered less vulnerable than existing claimants? Of course, that is nonsense and worthy of Ebenezer Scrooge.
These Benches welcome the idea of merging contributory benefits and creating a new unemployment insurance, but the fact remains that we are still waiting for an overdue comprehensive overhaul of the Department for Work and Pensions. Until the Government get serious about fixing health and social care—systems that are intrinsically linked to people’s ability to work—the welfare system will continue to struggle. The social care review’s three-year timeline is hugely disappointing and highlights the lack of urgency in addressing these critical issues. If the Government truly want to cut benefit spending, they must first address the root causes, not just apply superficial, short-term fixes borne by those least able to object.
These Benches remain committed to supporting people with disabilities into employment. We agree whole- heartedly with the Government’s aim to provide a right to try to work without the risk of losing benefits. However, from history, I have a sneaking premonition that it will be more difficult, and slow, to get back on to the benefits ladder once you have tried to work. That is what has happened in the past.
The wider changes, including delays in the health top-up for young people and increasing reassessments, must be approached with caution. We need to ensure that any reforms we make are sustainable and focused on long-term support for those who are most in need. Does the Minister agree that a balanced approach is needed—one that addresses the root causes of welfare dependency and puts people’s dignity and well-being at the heart of its reforms?
Baroness Sherlock (Lab)
My Lords, I thank both noble Lords for their comments and questions. Maybe we can start by agreeing that we all have great respect for each other, which is both genuinely true and one of the joys of this House. We are able to have conversations and respect one another while disagreeing.
Having got that out of the way, I probably need to start by saying it is possible that some of what we are trying to do has been misunderstood. So let me summarise in my own words what we are trying to do here. First, we need to recognise that the UK has a near-record number of people who are economically inactive on health grounds. The numbers on incapacity and disability benefits are rising at an unsustainable rate, and that is not just down to worsening health. The figures and the evidence show that there are more people who say they have a disability or a long-term health condition affecting their daily lives, but the number going on disability and health benefits is going up twice as fast. So it is not just about health; there is something about the way our system works.
If those numbers keep going up, as more people are driven into the system, fewer people are left to sustain it. One in 10 working-age people now gets a sickness or disability benefit. Before the pandemic, we spent £30 billion a year on those benefits; the figure is now over £50 billion and by the end of the decade it will be £70 billion on working-age benefits. That is not sustainable. So I say to the noble Lord, Lord Palmer, that I absolutely know where he is coming from but, if we cannot get the system on to a sustainable footing, it will not be there for the people who need it in the next generation and the one after that. We have to get the system working.
As well as being unsustainable, the system is failing those that it serves. The current system, as my right honourable friend described in the Statement, divides people into artificial binary categories: can and cannot work. Those who are deemed able to work are put out there, given support, encouraged to get a job and paid a standard allowance. Those who cannot are paid more money, left alone and given no help—the system disengages. We know that that is not the reality for most people. We know that 200,000 people on incapacity and disability benefits say they could work right now with the right support and the right job, but the system does not encourage them to do that; it actually discourages them.
Social security provides a vital safety net for those who rely on it, but we need it to be there for the future as well. Our Green Paper sets out how we will refocus the social security system towards empowering people to find work, while protecting those who most need help by supercharging the employment support with an extra £1 billion and a focus on early intervention, and by separating the link between the capability to work and extra financial support, so that everyone can work and not risk their benefits.
The noble Lord, Lord Palmer, suggested that this was simply a cost-cutting measure. I hope I have explained to him why the measure is trying to do two things. It is trying to place the whole system on a more sustainable footing and it is trying to reform it to make sure that it can support all those who can work to be able to go out there and get a job, to develop in it and to build a life in it, while absolutely guaranteeing to support those who are never going to be able to work or who have the most severe needs.
The estimate—we will get the details when the OBR does the figures for the Spring Statement next week—is that this package will save £5 billion in 2029-30. When the figures come out, I encourage the noble Viscount to have a look at them and compare them with what his Government had in mind, and we can then have a conversation about them. However, even with these changes, we are not reducing spending on disability and sickness benefits. We are spending less to try to make the system sustainable, but the numbers will keep on going up.
The noble Lord mentioned the question of people being put into poverty. One thing to stress is that anyone who is getting benefits at the moment—if they are getting PIP or the universal credit health element at the moment—will keep those benefits unless and until they have a reassessment and their eligibility changes, so this is a system for the future.
The noble Lord asks why it is different for those coming in afresh. The answer is that we have to make the system sustainable and that is the best way to do it. However, we want to support people in transition. Of course, some people will end up losing entitlement, but we want to look into how we can best support them, including possibly with transitional support to make the adjustment to the new regime.
The noble Lord asked about the DWP. One of the things that has worried us as we came into government is the lack of trust and confidence in the system, and we are really determined to address that. It is one of the reasons that we say in the Green Paper that we are going to develop a new safeguarding system for DWP to try to rebuild trust and confidence in the system. That is why, for example, we are going to move to recording all assessments by default, so that people can be clear and have confidence in the process when that is happening.
Crucially, for those on the universal credit health system who have the most severe lifelong health conditions which have no prospect of improvement, so they are never going to work, we are going to look at providing an additional premium to protect them so that they are secure. For people in that group, with both new and existing claims, we will guarantee that they will never face a full reassessment in the future.
The noble Viscount asked about WCA. I think he is aware that not only were the previous Government’s proposals to reform WCA, I am sorry to say, poorly thought out, but their consultation was so bad it was actually ruled illegal by the courts, which made it simply impossible. We had a manifesto commitment to either reform or scrap the work capability assessment. We have come to the conclusion that it cannot be reformed; we are therefore going to scrap it. Apart from anything else, that will mean that people will not have to go through two separate assessments. We think that is the way forward.
I probably have to take on the noble Viscount’s challenge here that the Government were going to do lots of things. I fully accept that, when his party were in government, they had lots of ideas, but they did have 14 years to do them. We, at this point, are nine months in. We have already made some announcements, we have a detailed Green Paper for reform, we are engaged in consultations and we are going to change the system. I understand this is hard. I know change is hard, but the system has been tinkered with for far too long. We need reform and we are doing it now.
It was of course Beveridge himself who identified the establishment of comprehensive health and rehabilitation and maintenance of employment as necessary conditions of success in social security. We need more than tinkering. We need a system that will be sustainable and will support people into work, but will protect those with the highest needs who can never work. We can do both. I welcome the contributions from both noble Lords and look forward to carrying on the conversation. We all need this change to work.
Lord Vaux of Harrowden (CB)
My Lords, I think we all applaud the desire to get people off benefits and into work, but to do that we need jobs and we need employers who are willing to take those people. I hope the noble Baroness will not mind my quoting from the impact assessment that accompanies the Employment Rights Bill in relation to day 1 unfair dismissal rights. It states that
“there is evidence that the policy could negatively impact on hiring rates. For example, employers may be slower to take on workers due to the liability and increased protections”—
and I stress this last bit—
“particularly for those that are seen as riskier hires”.
Does the noble Baroness agree that that seems to be in direct conflict with the desire to bring people into work, and does she think it is a good idea?
Baroness Sherlock (Lab)
I thank the noble Lord for that question. I have real confidence in this. The noble Lord may know that in January we published the terms of reference for the Keep Britain Working review, a review headed by the former chair of John Lewis, Sir Charlie Mayfield, who is looking at ways in which we can make workplaces more receptive and more able to take on people who have health conditions and disabilities. It could include all kinds of ways in which we can support them. We want to remove the barriers to employers doing that.
We already know that this is the case: reasonable adjustments are often talked about as a way of doing it. The noble Lord may think that these difficult hires. In fact, it is estimated that, on average, employers could save between £5,000 and £11,000 for every employee they prevent from falling out of work. So having an inclusive workplace is not a “nice to have”: it is not an extra. It is a way of making sure that we protect those who are currently working. There are significant numbers of people at the moment who are working but have a condition, and hundreds of thousands of them fall out of work every year. Our system is trying to work with employers to protect those who are already in work, but we have lots of employers really engaged with us in jobcentres, in the work we are doing and in building relationships. People want to do this. We can do this.
Baroness Browning (Con)
My Lords, I refer to my interest in the register. When we talk about getting people back into work, perhaps the Minister could reflect on that group of people who have never been in work. I am thinking not just of school or college leavers but people who are now in their 40s and 50s and have never been in work, but actually still want to. She will not be surprised to know that I am referring particularly to the autism community. In the 32 years that I have worked in this building, the employment rate for the autism community has gone up from 17% to just 23%. These people have lived through many Conservative and Labour Governments, not forgetting a coalition Government. To get them into work will require something really different from what has been applied before. They are a discrete but important group. Given the Green Paper and the Statement that we have heard today, is the Minister going to get autistic people into work?
Baroness Sherlock (Lab)
My Lords, I am really grateful to the noble Baroness for raising that question and, as she so often does, reminding us of the challenges in this area. Let me say a couple of things. To reassure those who may be worried, as I have said before, anyone currently receiving benefits will carry on getting them unless there is a reassessment and their eligibility changes. However, that is not the limit of our ambition. One of the reasons we want at least to have a supportive conversation, rather than abandon people who are simply getting those benefits, is to begin to understand what more we could do to support them.
There are some people who will find it very difficult to get into work but maybe they could, with the right support, begin to do some voluntary work. Perhaps they could begin to reach out and get some fresh kinds of support or connect with the local community. The biggest challenge for us, as in the noble Baroness’s words to us today, is how we challenge employers to take this on. We are planning, as part of the consultation on the Green Paper, to not only invite people—I expect very many responses—but to hold events for the public and round tables, to hold discussions both in person and elsewhere. I would be really grateful if she would be willing to talk to us about addressing this as part of that consultation.
Baroness Lister of Burtersett (Lab)
My Lords, parts of this package are very welcome; for example, the right to try paid work, the strengthening of contributory benefit for unemployed people, the increase in the UC standard rate—albeit very modest—and the commitment to consult disabled people on at least some of the changes. But overhanging them is the £5 billion cut from a social security system which, according to CPAG, suffered £50 billion a year in cuts thanks to the Tories. The Joseph Rowntree Foundation warns that this is the biggest cut in disability benefits since 2010, yet disabled people are at disproportionate risk of poverty.
What assessment have the Government made of the future impact of the cuts on poverty, not mentioned in the Statement, and reliance on food banks, which is of great concern to Trussell? What will happen to entitlement to carer’s allowance, for which PIP is one of the most common qualifying benefits? When the Green Paper says that it represents a “start”—a welcome start—of the rebalancing of UC payment levels and of addressing “the basic adequacy” of UC, can we look forward to a proper review of its inadequacy?
Baroness Sherlock (Lab)
My Lords, my noble friend raises some interesting points and I am grateful for the welcome she has given to some elements of our reforms. On the question of adequacy, it may be—in her words—modest but this is actually a significant above-inflation cash increase in the standard allowance of universal credit. It means that by the end of this Parliament, people will be £14 a week, or £775 a year, better off. That might be modest proportionally; it is significant and will make a difference to people’s lives. But the real way that we will make a difference to people’s lives, in so many cases, is by helping them to move into work.
There is only so much that the benefit system can do. There are those who cannot work and have severe needs, and the benefit system must always be there to support them. But for those who can, there is so much more out there that we could be doing and we simply have not been doing it. That is really one of my hopes. We will deal with poverty in other ways. Just so my noble friend knows, the impact and equality assessments will be published next week alongside the Spring Statement. In the long run, this is not about simply tinkering around the sides of a system. We are not just doing blanket cuts. We are doing two things: trying to put this system on a sustainable basis, so it will still be there for the future, but, much more than that, trying to reform it so that people genuinely can get into work who previously have been given no help and been abandoned. That way, we can really make a difference to people’s lives.
The Lord Bishop of London
My Lords, I welcome the Government’s focus on and increased investment in supporting people back into good work, and the proposed safeguards through the right to try guarantee. However, I am intrinsically wary of attempts to address the drivers of ill health through the social security system, rather than tackling root causes. We do not know yet the content of the NHS plan. Supporting people who are currently claiming incapacity benefits into work will put considerable pressure on an already stressed health system. What steps is the Minister’s department taking to work with the Department of Health and Social Care to ensure that the right support is available for people with physical and mental health needs?
Baroness Sherlock (Lab)
I thank the right reverend Prelate the Bishop of London for that important question. I mentioned earlier that the prevalence of disability has increased. I have to correct that: the rate of prevalence has increased. Again, the rate of the increase of disability benefits has gone up by twice as much. If I have got that wrong, they will correct me again and I will read it out next time I get up.
On the question of health, crucially, we have invested almost £26 billion extra in the NHS, but change will take time. We intend to implement our reforms to PIP in November 2026, subject to parliamentary approval. To reassure the right reverend Prelate and anyone listening, everyone claiming PIP will continue to receive it until they are reassessed and their eligibility changes. We will always seek to protect the most severely disabled.
In the meantime, we are looking to do a couple of different things. We are trying to get early intervention to stop people falling out of work, and we are about to launch our health accelerators, which will support efforts to tackle economic inactivity through getting the NHS to shift to prevention. We are trialling in some of our pilot areas how exactly we can bring together the NHS and employment support to address that.
The right reverend Prelate raises an important point. One of the challenges for us is that there are things that will need the NHS to be sorted out. There are other areas where a range of different types of support could enable people, even now, to get into work. We are determined to do both.
Baroness Fraser of Craigmaddie (Con)
My Lords, I declare my interests in the register. There is much in this Statement to be welcomed, apart from the bit that says it is all the Conservatives’ fault. I particularly welcome the emphasis on getting disabled people back into work. At Cerebral Palsy Scotland, where I work, we are dealing with a devolved social security system. Adult disability payment, ADP, is replacing PIP and DLA in Scotland. It is similar, but it has a different application and renewal process. We are finding that there are people caught between DWP and Social Security Scotland. Apparently, there are about 80,000 people in Scotland still on PIP. Can the Minister assure me that, in the process of all these reviews and all this change, those on the devolved benefits systems will not get left behind or be negatively affected?
Baroness Sherlock (Lab)
I thank the noble Baroness and commend her for her work with Cerebral Palsy Scotland. She raises a really important point. To be clear, the proposals in the Green Paper would apply directly only to UK Government areas of responsibility. We are working through the areas of interaction between reserved and devolved benefits, with the Scottish Government in particular. The noble Baroness described one area, and there are others. As she mentioned, the Scottish Government’s adult disability payment replaced PIP. Therefore, the proposals on PIP will apply only to those areas we control. I encourage her to speak to the Scottish Government. In the end, it will be for the Scottish Government to work out how they will make their system sustainable. From our side, we can make sure that, as far as possible, the systems align. It is an important point and one we are very aware of. We will certainly make sure we address it specifically in our discussions with the devolved Administrations.
Baroness Primarolo (Lab)
My Lords, I would like to ask the Minister a question on the right to try, which I am sure we would all agree is a principle that is crucially important. How can we make sure that people can take the risk to try paid employment, without the fear that is currently in the system that their benefits will be put at risk?
Baroness Sherlock (Lab)
I thank my noble friend for the question. Of course, she has a great deal of experience in this area; she knows only too well how the system works and how it has worked in the past.
This is one of the real problems with the current system. When people have been put through that binary judgment that they either can or cannot work, if they get into the “can’t work” category, the risks are so great that, if they try to work and fail, we will then come and say, “Ha, so you can work after all”, and then it will be taken away.
We are going to do a couple of things. First, there is a linking rule already there, which we will make sure that everybody is aware of, so that if you try a job and come back on to benefits within six months, you will be able to go back to your old benefits. That touches on a point raised by the noble Viscount as well. But we are going to go further: we are going to legislate to make it very clear that work in and of its own right will never be a reason for triggering a reassessment. It is really important that people know that. In the long run, we will break the connection between can and cannot work and support, because in the long run it is the PIP assessment and your abilities and needs that will determine how much support you get, not whether you can or cannot work. I hope that reassures my noble friend that we are determined to tackle this.
Baroness Neville-Rolfe (Con)
My Lords, I am speaking from the Back Benches today because I am very concerned about the sustainability of the benefits system, with an ageing population and the ranks of the inactive and people on disability benefits, as the Minister described. I am sure that it is right to focus on getting people back into work—and I am absolutely delighted that Charlie Mayfield is helping the Government. He comes from retail, as I do, and retail is detail. That sort of person is very helpful in trying to make things work.
I have a couple of questions. First, I have done some work on fraud in the past, including trying to use AI to reduce the cost of fraud. I was very concerned to hear that only one in 10 assessments is face to face. What does the Minister feel the opportunity is in tackling fraud?
Secondly, on timing, the Minister mentioned that there would be a change in PIP in November 2026 and in the work capacity assessment in 2028. Given the scale of the problem, can she give me any reassurance about timing and getting on with those changes?
Baroness Sherlock (Lab)
Those are two great questions, and I thank the noble Baroness for them—and also for the phrase “retail is detail”, which I shall now deploy as though it were my own whenever the opportunity presents itself.
I am sorry for not picking up the question of fraud, because the noble Viscount asked about that as well. We have a fraud Bill coming to this House, which is making its way through the other place at the moment, so we are absolutely determined to crack down on fraud and will use a whole range of means for doing that. We will have an opportunity to discuss that in detail when the Bill arrives here.
We are thrilled that Charlie Mayfield is leading this review for us. We know that if we cannot get the relationship with employers right and create a system that works for employers and employees, we will not be able to get the jobs we need, especially for people who find it difficult.
To reassure the noble Baroness, if she looks at annexe A of the Green Paper, there is a table on Green Paper measures that gives timings on everything coming in. However, the real reassurance is that we have already started. For example, the changes to universal credit, assuming they get parliamentary approval, will start to come in from next April. But the work has already begun on supporting people into work. The Secretary of State has already announced an extra 1,000 work coaches to work with people who are sick or disabled to help them get into work. We know from past evidence that sometimes somebody simply spending a bit of time with somebody and encouraging them in can make all the difference straightaway. So we are starting on that already—we are not waiting for it to happen. We are already piloting around the country, as I said to the right reverend Prelate, trailblazers for young people and for the wider population on how we work with local councils. Sometimes, whether someone can get into work is not just about what we do; whether someone can get a job in Manchester might be about what the childcare is like, how the buses run between where the jobs are and where the homes are, and what the local labour market is like. We are working with metropolitan authorities and engaging locally to try to turn the system around and get everybody pointing in the same direction.
Finally, I really share the noble Baroness’s concern about the sustainability of the system, but I want to make sure that we are doing it to keep the system there for the future—because I believe passionately that we need a safety net there for those who struggle and who cannot work. We have to make sure that it works, and we are committed to making sure that everybody who has the most severe needs or will never be able to work will always get the support they need under this Government.
Baroness Pitkeathley (Lab)
My Lords, the noble Baroness, Lady Lister, mentioned carer’s allowance. The Minister will know that many carers have disabilities and long-term conditions themselves, and caring itself is a risk factor for having to give up work. In their consultation on the Green Paper, therefore, will the Government commit to doing more for unpaid carers, particularly around enabling them to remain part of the workforce where they want to do so? So many of them do, as the noble Baroness knows.
Baroness Sherlock (Lab)
My Lords, I am grateful to my noble friend for raising that question and I apologise to my noble friend Lady Lister for having forgotten to deal with it in my response to her. I commend my noble friend Lady Pitkeathley for all that she does in this space. First, she knows more than anyone that we are investing in carers: we have just significantly raised the amount of money that somebody can earn before they will lose their carer’s allowance. We have also launched an independent review of carer’s allowance to make sure that the system works. The eligibility change will benefit 60,000 carers-plus by 2029-30.
My noble friend makes the excellent point that the overlap between caring and disability is sometimes more intertwined than we realise. Again, I reassure her that if somebody is on PIP, neither the carer nor the person being cared for will lose that money unless and until there is a reassessment and their eligibility is found to have changed. More than that, we made a specific commitment in the Green Paper to look carefully when considering the consultation responses at how we can support any unpaid carers who find they are affected by the changes that we are proposing. In light of that, I strongly encourage anyone such as her or people she may know to respond to the consultation, to engage with us and to make sure that we understand any unforeseen consequences and can think about how we deal with them.
Lord Young of Cookham (Con)
The noble Baroness has announced a wide range of reforms. Can she say which require primary legislation and which can be done by secondary legislation? Can she outline the implications for those who work in her department of the reforms she has just touched on?
Baroness Sherlock (Lab)
With parliamentary approval, we will use primary legislation to address the changes in universal credit and PIP eligibility. Assuming that we have parliamentary approval and that time is found for Bills by whoever makes these decisions, we will bring forward legislation on those. Some of the other aspects of the reforms that we are consulting on in the Green Paper, if taken forward, will also need primary legislation, but of course they are the subject of consultation, so, as the noble Lord will understand, I would not commit to doing them at this stage; it depends on the result of the consultation. Some of those will need consultation, and primary legislation for them, with parliamentary approval, would have to be done in a subsequent Session.
On the impact on people in my department, we have looked carefully and have been working with colleagues across the department to make sure that the changes that we want to make are deliverable—that has been very much at the forefront. Somebody asked me recently what the biggest difference is between being in opposition and being in government. It is that, when you are in opposition, your primary concern is policy; when you are in government, one of your concerns is how you can actually deliver things. We are very conscious that we have to make sure not only that the system has the right elements to it but that it is deliverable, and we are determined to do that.
Universal Credit (Standard Allowance Entitlement of Care Leavers) Bill [HL]
Baroness Sherlock ExcerptsFriday 14th March 2025
(3 months, 1 week ago)
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Viscount Younger of Leckie (Con)
My Lords, once again I thank the right reverend Prelate the Bishop of Manchester for bringing this Bill before your Lordships’ House. As we said at Second Reading, we support the sentiments behind the Bill, which has raised awareness of care leavers and the struggles they face. We all know how vulnerable young people who leave care can be and the challenges of transitioning into adulthood without the support that many others receive.
As noble Lords will be aware, care leavers who are over the age of 18 are entitled to claim universal credit on the same basis as over 25 year-olds, but at a lower rate. Standardising the allowance payable is a noble cause that I know, and we have heard, the right reverend Prelate cares very deeply about, and he is to be commended for his tenacity and dedication to the cause. But finally, to restate our position on the Bill, we believe that a number of alternative provisions already exist, such as the setting up home allowance. Extending the monetary support to care leavers, as this Bill suggests, has fiscal implications, as has been highlighted. It will be up to His Majesty’s Government to decide whether the provisions of the Bill are financially workable.
The Parliamentary Under-Secretary of State, Department for Work and Pensions (Baroness Sherlock) (Lab)
My Lords, I add my thanks to my friend the right reverend Prelate the Bishop of Manchester, and I commend him for his work on this Bill and for giving the whole House an opportunity to understand more about the experiences of care leavers and those in the care system now. I add my thanks to charities such as Barnardo’s and Become. I had the opportunity to speak with care-experienced young people at events there and I learned a lot from that, as I did from discussions with the right reverend Prelate at earlier stages of the Bill.
The right reverend Prelate is quite right that adverse childhood experiences are at the heart of this. We recognise that many care leavers, because of the experiences they have had, are more likely to be out of education, employment or training, and more likely to experience financial difficulty, health problems or homelessness. Although, as the right reverend Prelate rightly predicted, I am not in a position to support his Bill today, I want to say that the Government are determined to make sure that we offer the right support to care leavers. We already offer a range of safeguards and specialist services to support them. Care leavers under 25 can claim the local housing allowance rate of housing benefit; they can get specialist support with transitioning into adult claims; they can get extra help in returning to education if they have missed out on that; and they can get all kinds of support to help them develop and get into jobs. However, there is much more to do and the right reverend Prelate is right to challenge us.
The Government are taking steps to improve support for care leavers and young people more widely. When the Children’s Wellbeing and Schools Bill comes forward, we will be looking to see how we can support care leavers to find accommodation and access local services. Through our youth guarantee, we will help all 18 to 21 year-olds get access to quality training or apprenticeships or find work. But that is all for another day. Again, I thank the right reverend Prelate and those who have brought these issues before the House, I thank all noble Lords who have contributed and I look forward to continuing to work on these issues as time goes on.
National Insurance Pension Underpayments
Baroness Sherlock Excerpts(3 months, 1 week ago)
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Lord Davies of Brixton
To ask His Majesty’s Government what steps they are taking to reduce the number of underpayments of National Insurance pension where entitlement to that pension is based on a spouse’s National Insurance record, and the underpayment is caused by “official error” by the Department for Work and Pensions.
The Parliamentary Under-Secretary of State, Department for Work and Pensions (Baroness Sherlock) (Lab)
My Lords, everyone should receive the state pension payments to which they are entitled. This Government understand the importance of putting right any errors. DWP became aware of issues with historic state pension underpayments in 2020 and took immediate action to investigate and correct the problem. A legal entitlements and administrative practices exercise—LEAP—began in January 2021, and DWP completed the vast majority of cases by December 2024 as planned. The exercise has now closed.
Lord Davies of Brixton (Lab)
I thank my noble friend for her Answer and welcome the good news. The problem is that this is only one aspect of the sheer complexity of state pension entitlement for spouses’ pensions. Because of the history, that largely affects women. Does my noble friend agree that the department should perhaps be doing more to inform people so they can find their way through the maze of entitlement?
Baroness Sherlock (Lab)
My noble friend raises a really important point. There is a lot of complexity, particularly in the old basic state pension. With the new state pension, your entitlement depends on your own national insurance contributions in the majority of cases, so in future it gets a lot more straightforward. Most people claim their new state pension online, so getting it is mostly automated. However, under the old state pension, if you did not have enough pension in your own right, you could inherit it from a civil partner or a spouse, or a divorced partner or a late spouse. That has led to all kinds of complexities. We are making sure that before someone reaches state pension age, the Pension Service writes to them to tell them what they have to do to claim their state pension. As part of that process, they have to give us the details that enable us to work out if they are still carrying forward any entitlements from partners’ contributions as well as their own.
So, we are really committed to making sure there is clear, accurate, accessible information out there about the state pension. There is lots of it online, on GOV.UK. There is even a tool called “Your partner’s National Insurance record and your State Pension”, which, while not imaginative, is a pretty clear description of what it does. If anyone would rather not go online, they can ring the Pension Service, which will talk them through it. We are really determined to help people get this right.
Lord Wigley (PC)
My Lords, will the Minister give an assurance that beneficiaries who have been denied the benefit to which they are entitled will be paid in full, however far back it goes?
Baroness Sherlock (Lab)
My Lords, some of the cases in the LEAP exercise go back to 2006, so this is already going back a very long way, but I can reassure the noble Lord that that the exercise went back through the book. This is really complicated, as I am sure he understands, but, in summary, the exercise specifically addressed women who reached the state pension age ahead of their husbands. That was not uncommon because, in those days, the retirement age for women was 60 and for men it was 65, so the woman got to the state pension age first. If she did not have enough pension in her own right and her husband reached the state pension age, she could then have inherited more state pension from his contributions. After 2008, that should have been done automatically by the DWP. Earlier, people had to claim, but where the DWP failed to do that automatically, the department has gone back through the entire book and made payments to all those people. That is what the system has been doing.
Lord Palmer of Childs Hill (LD)
My Lords, there seems to be errors and more errors—a tower of errors without end. State pension underpayments have also arisen where there are errors in NI records, because of missing home responsibilities protection. The Minister mentioned pensions for women. Can she tell us how much the department has so far paid in arrears to those affected mothers? When does she expect this correction exercise to be completed?
Baroness Sherlock (Lab)
That was slightly different: it was about an error in people’s national insurance records. The DWP itself discovered during a fraud and error exercise that there were some historic errors in recording where people should have had home responsibilities protection in their national insurance record, which in turn would have affected their pension record. The Government have now contacted all the people they have identified as potentially missing HRP and invited them to make a claim for those missing periods. HMRC issued over 370,018 letters to potentially affected customers, and there have been approximately 493,813 hits on the GOV.UK HRP online checker. So far, the DWP has received 19,491 cases from HMRC and processed 11,694 of them, paying arrears of £42 million. I hope that answers the noble Lord’s question.
Viscount Younger of Leckie (Con)
My Lords, recent statistics from the DWP demonstrate that 13 million people are receiving state pension payments. Saving adequately for retirement remains a challenge for many, particularly, as has been said, for single women and for those with gaps in employment, such as women taking time out to raise children and people suffering ill health. That is why the previous Government lowered the threshold for auto-enrolment to 18, with an opt-out, to enable retirement savings to commence earlier. As the Minister knows, the deadline of 5 April is fast approaching, before which people under the age of 73 can apply to buy back some of those lost years of contribution going back to 2006, and those benefits could make a huge difference to people’s lives. What is the level of uptake for this? Thinking about the warm words that the Minister gave about publicising DWP products, as it were, what more can she do to publicise this and make sure that the deadline is met?
Baroness Sherlock (Lab)
I thank the noble Viscount; there have been good questions today. With the transition from the old state pension to the new state pension, it became more important that people had their own national contribution records in full, because that is what their pension will depend on in future. The previous Government set a deadline—originally April 2023, if memory serves me—by which people had to decide whether to apply to buy back missing years. That deadline was extended to April 2025, so it is coming up on 5 April. I can assure the noble Viscount that there is a surge of people wanting to buy years back; in fact, HMRC and the DWP are working together to ensure that everybody who wants to pay money to fill those gaps in their record can do so. Not only is there the online tool I mentioned earlier; customers can identify gaps and make payments automatically without even contacting the DWP or HMRC, or they can phone us. We have increased resources to about 480 people working across the Revenue and the DWP to manage the high volume of calls coming in.
To reassure not just the noble Viscount but anyone listening out there: as long as people contact the DWP ahead of the 5 April deadline, they will be able to fill gaps back to 2006. In addition, we have launched an online call-back form; people can simply register their interest and the DWP will call them back within eight weeks. Again, provided they register that interest before 6 April, they will be able to fill those gaps if they want to.
Baroness Coffey (Con)
My Lords, I welcome what the Minister has said. The Answers to some Parliamentary Questions I tabled to the noble Lord, Lord Livermore, suggested that HMRC did not hold these records centrally, so I am delighted to hear that work is ongoing. May I press the Minister further on what she just said? I am delighted to hear about the increased resources, but there is an intricate calculation to be made: for some people, it will not be worthwhile paying the extra voluntary national insurance contributions if they consequently miss out on pension credit. Recognising that the timeline is fast approaching, can the Minister assure me that sufficient resources are in place to help people make that calculation?
Baroness Sherlock (Lab)
The noble Baroness makes an excellent point; I would expect no less, since she has rather more experience in this field than I do. She is right that there will be some people, in limited circumstances, for whom this becomes a marginal issue. A significant amount of information is available online from the DWP about the different sets of criteria, but I will check on the points she made and see whether we need to do anything else to make sure that the information is out there.