Public Authorities (Fraud, Error and Recovery) Bill

Baroness Fox of Buckley Excerpts

Committee stage
Wednesday 11th June 2025 Grand Committee

[Lord Palmer of Childs Hill (LD)]

My Lords, Amendments 61C and 61D in the names of the noble Baroness, Lady Finn, and the noble Viscount, Lord Younger, seek to ensure that liable persons receive clear written communication regarding the outcomes of reviews and that Ministers demonstrate due consideration of wider circumstances when requested. This kind of transparency is crucial in practice, as it helps individuals to understand the basis of decisions affecting their finances and provides reassurance that their personal situations are being taken into account. For many people facing recovery actions, receiving clear, accessible information can make a significant difference in navigating the process and seeking further recourse, if needed.

Amendments 61E and 61F, alongside Amendments 62A and 62C, address important procedural and operational details that could impact on both individuals and employers. For example, limiting the scope of regulations as proposed in Amendment 61E may prevent regulatory overreach, providing clearer boundaries for those affected. Consulting employers on costs regarded as reasonably incurred, as proposed in Amendment 61F, encourages dialogue and can help to avoid disputes over financial responsibilities. Meanwhile, the provisions to restrict the restart of suspended deduction requirements after 24 months, as proposed in Amendment 62B, and to ensure written reasons for revocation of deduction orders, as in Amendment 62C, introduce important safeguards that promote fairness and clarity. In practical terms, these measures help to reduce uncertainty for both liable persons and employers, fostering greater trust and smoother administration. I support these amendments.

[Baroness Fox of Buckley (Non-Afl)]

My Lords, I wanted to reiterate my particular support of Amendments 62A and 62B, even though they do not go as far as my amendment in relation to suspended orders. The sense of a sword of Damocles hanging over people is something that we could do with getting rid of. That would be an easy thing for the Government to accept without in any way compromising the aims of the Bill.

In relation to the other amendments, which I broadly support, I want to emphasise something that I keep thinking as I read the Bill and sit through Committee. Many aspects of the legislation can create an atmosphere of fear, uncertainty and sometimes even paranoia about what is going on if there is a sense of secrecy. This could be alleviated with the opening up of human communication to explain reasoning. These are difficult situations. We are talking, in some instances, about people who have committed wrongdoing of some sort, but it is important that liable persons have a sense of understanding the process. Very often, the way that the process gets stuck behind closed doors has created all sorts of problems in parallel situations.

I want to emphasise how, if things are left to internal processes, it can reduce them to hollow box-ticking. Civil servants or whoever knowing that they can be answerable will ensure that better work is carried out. It will also help to smooth the way for people to take this Bill seriously and not see it as some grand state surveillance conspiracy. It is important, in order to give credibility to the fraud recovery at the heart of the Bill, that the Government are seen to be as flexible as possible about all parties being held to account for what would otherwise be seen as some quite draconian powers.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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Together, these amendments strike a fair balance. They do not obstruct enforcement; they strengthen legitimacy. They do not undermine ministerial authority; they anchor it within a system of checks and transparency. Above all, they ensure that those subject to these powers are treated with clarity, fairness and respect. I hope that the Minister will reflect on the spirit in which these proposals have been brought forward constructively and with a genuine desire to strengthen the Bill. I urge noble Lords across the Committee to support these amendments, which provide a proportionate and practical means of reinforcing integrity in both our legislation and the public systems that it seeks to protect. I beg to move.

[Baroness Fox of Buckley (Non-Afl)]

My Lords, I will be very brief. I have a lot of sympathy with most of the amendments in this group, apart from Amendment 63A, which fills me with dread. Fraud facilitation sounds as though it is a new crime, but I do not think this is the right place to bring it in. I appreciate that it does not necessarily have a criminal penalty, but it is also not entirely clear what it is.

I know that the Opposition have been pushing the problems of “sick influencers” in another Bill—this is a bit of a theme—but I get very nervous about requiring the authorities to trawl through people’s social media accounts yet once more to see what they are saying, then to blame them for things that happen. When I think of examples that I have been shown of “sick influencers”—but there are others—there is a thin line between people who are trying to give hacks to individuals on how to fill in labyrinthine forms and cope with the welfare system and people who show them how to cheat. I therefore urge against this: it is a can of worms, which I would keep well away from.

There is also a danger that you will allow individuals to abdicate responsibility by saying, “I did it only because I was told to by the influencer who I saw on Instagram”. This goes against the spirit of due process and of taking responsibility.

[Lord Palmer of Childs Hill (LD)]

My Lords, Amendment 63A addresses the important issue of those who facilitate fraud by providing information, advice or support. It proposes that such individuals could be subject to penalties. I believe that this measure helps to close potential loopholes and hold accountable not only primary offenders but those who enable wrongdoing. From an individual’s perspective, this could strengthen the integrity of the system and act as a deterrent against abuse.

Amendment 63B seeks to prevent the Minister from unilaterally determining penalties for persons who have not received a payment, which is crucial to protecting individuals from unfair or arbitrary penalties that could cause undue financial or reputational harm.

Amendments 63D and 64A focus on transparency, accountability and procedural fairness—elements that directly affect the experiences of those subject to the Bill. Providing written reasons for decisions following a review, set out in Amendment 63D, would ensure that individuals fully understand the outcomes and the rationale behind them, enabling them to respond appropriately, or seek further recourse if necessary. Amendment 64A would remove the Minister’s sole authority to change the appeals process and would instead require independent review—we have discussed in previous sittings what “review” and “independent” mean—and parliamentary oversight. It would introduce vital protections for individuals and guarantee that any changes to how appeals are handled are thoroughly scrutinised, preserving fairness and maintaining public confidence in the system’s impartiality. On that basis, I support these amendments.

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I hope that the Minister considers these proposals in the constructive spirit in which they were brought forward—as tools to enhance legitimacy, fairness and the long-term success of this important legislation. I beg to move.

[Baroness Fox of Buckley (Non-Afl)]

My Lords, I consider these three amendments as probably three of the most important amendments that have been tabled so far. I congratulate the noble Baroness, Lady Finn, for explaining why so well. They reflect a number of other concerns—it is not as though we have not heard them before—and articulate well the sense of responsibility that we should all have in this Room, as we scrutinise the Bill, in terms of the enormous amount of power that this legislation gives the state. It is why ministerial and parliamentary oversight is important and cannot, in any way, be neglected.

An astounding amount of power has been created in the name of tackling fraud. I sometimes think that it is disproportionate. Regardless, one would be much more reassured if there was at least the knowledge that this was always done by and answerable to Ministers and Parliament. Parliamentary oversight of something as powerful as this is essential and has been reflected in a number of amendments.

I have some other quick points. I thought that the noble Lord, Lord Palmer of Childs Hill, made a compelling argument for the Covid inquiry. It is true that, when I tell people that I am working on a fraud Bill, without exception they say, “The Covid stuff?” I say, “Possibly not; it is not there”. I listened and heard what the noble Lord said about why it is not appropriate, but I wanted to note that.

Of course, it was an extraordinary period for all the reasons that have been explained, but it has become almost impossible since to work out who said and did what to whom. In other words, there is little in the way of tracing accountability and being clear about ministerial sign-off, so I think the transparency register is a brilliant idea. It is clear; if you have these powers, let us see who signed off. No Minister should be frightened of that, because it is important for public accountability and, as has been said, is a way of ensuring that you are not held accountable for things that you did not sign off. It is a much clearer way of understanding it.

I am rather bemused by the final amendment, Amendment 68C. In my background reading, I have read a lot about the crisis in people who are sceptical about the Bill, who are worried that there are no people who are suitably qualified to see its powers through, so the way that this amendment has been posed seems sensible to me.

It is ironic, because there is an argument familiar to those who have been following the schools Bill about whether everybody who stands in front of a group of pupils needs to be qualified or not. “Not always” is my opinion, as somebody who was a teacher for many years. We should not be too rigid, because that is the nature of teaching. I was qualified, but that did not necessarily guarantee that I was a brilliant teacher. I know that qualifications do not necessarily guarantee anything but, in an instance like this, it seems absolutely right that the people entrusted to carry out these powers have the appropriate qualifications for what are complicated, complex financial matters. I therefore support all three amendments, which I think are very important.

[Lord Palmer of Childs Hill (LD)]

My Lords, I am also pleased to express support for Amendments 68A, 68B and 68C, which collectively strengthen ministerial and parliamentary oversight of the powers exercised under the Bill by authorised officers on behalf of members of the Cabinet Office, as other noble Lords have said. Ensuring that robust oversight mechanisms are in place is essential to maintaining public confidence in how these significant powers are deployed. By enhancing scrutiny, these amendments help to guarantee that such powers are used appropriately and proportionately, reducing the risk of misuse or error.

Amendment 68C, which requires investigators to hold professional qualifications comparable to those of officers in the Department for Work and Pensions Fraud Investigation Service is particularly welcome. They need professional qualifications. This commitment to professionalism and expertise safeguards the integrity of investigations and reinforces trust in the system. From our perspective, it is crucial that those entrusted with such important responsibilities are properly trained and qualified, ensuring fairness and consistency in enforcement. Together, these amendments produce a more transparent—we always come back to transparency—accountable and professional framework for combating fraud within public authorities.

Let it see the light and, when it does, there is a way of controlling it. Too often, whoever are in government think they know best and ask, “Why do we have to make ourselves open to scrutiny?” But it is that scrutiny, that existence of light from beyond, that makes the legislation fit for purpose. I support these amendments.

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[Baroness Bennett of Manor Castle (GP)]

My Lords, it is a pleasure to follow the noble Lord, Lord Vaux of Harrowden, and to speak in favour of Amendments 75A and 79A, to which I have attached my name and which noble Lords will see have rather broad support in political terms—perhaps not the broadest I have ever seen but it is certainly up there. I must also pay tribute to Justice, a cross-party law reform and human rights organisation that is the UK section of the International Commission of Jurists, which has been most determined in ensuring that these issues are raised in this Bill, in this context.

I have already addressed these issues in the Chamber in a number of amendments to the Employment Rights Bill that I tabled and spoke to. I am not going to repeat all that I said there, but I cross-reference those amendments. If noble Lords want to find out more about this issue, there is an excellent book by the researcher Shannon Vallor, The AI Mirror, which is a useful metaphor for understanding the risks whereby we live in a biased society in which those biases risk being reflected back to us and magnified by the use of artificial intelligence and algorithms. That is very much what these two amendments seek to address.

The noble Lord has already given us two international examples of where using AI, algorithms, stereotypes and generalisations in investigations has gone horribly wrong. I have to add a third example, which is the infamous case in Australia of “Robodebt”. That was an automated debt recovery and assessment programme, from the rough equivalent of the DWP, that was exercised in Australia. There was controversy before and through its implementation, and it was an unmitigated disaster. I point the Minister and others to the fact that there was a Royal Commission in Australia which said the programme had been

“a costly failure of public administration in both human and economic terms”.

I note that the House of Representatives in Australia passed a public apology to the huge number of people who were affected.

In a way, I argue that these amendments are a protection for the Government, that this will be written into law: there is a stop that says, “No, we cannot allow things to run out of control in the way we have seen in so many international examples”. I think these are truly important amendments. I hope we might hear positive things from the Minister but, if not, we are going to have to keep pursuing these issues, right across the spectrum. I was very taken: Hansard will not record the tone of voice in which the noble Lord, Lord Vaux, said that the Government wish “to mainline AI”, but it is important to note that a concerning approach is being taken by the Government to the whole issue of artificial so-called intelligence.

[Baroness Fox of Buckley (Non-Afl)]

My Lords, as part of the unusual alliance, I think that now is a good time to reflect on where we are in the Bill. We are now talking about powers targeted at recipients of universal credit, employment and support allowance, and pension credit. Relevant accounts that can be flagged to the Government include any account

“into which a specified relevant benefit is paid”.

Approximately 9.4 million people are in receipt of a benefit currently specified by the Bill—one in eight people in the UK. This already risks creating a two-tier society in and of itself, in which certain groups are subjected to intrusive financial monitoring by the state while others are not.

I was very pleased to see these two amendments because I worry when I consider that, last year, two-thirds of claims flagged by a DWP algorithm as potentially high-risk were, in fact, legitimate. We are now talking about the use of algorithms in relation to the group of people I talked about, so I am happy to support the noble Lord, Lord Vaux, and the noble Baroness, Lady Bennett of Manor Castle, on Amendments 75A and 79A.

The key thing here is to stress something that has already been discussed at great length throughout our debates on the Bill, which is what we consider “reasonable grounds”. The noble Lord, Lord Vaux, has raised reasonability throughout. Generally, but not consistently, the investigator powers in the Bill are exercisable only when there are reasonable grounds for suspicion that, for example, fraud has been committed. Reasonable grounds are a safeguard to protect individuals from baseless state interference and fishing expeditions. They uphold the rule of law by preventing arbitrary state power but “reasonable” requires clarification once we go into the context of the role of technology, which is at the heart of the Bill; that is one of the reasons why I have put my name to these amendments and will raise other amendments in relation to algorithms later on in Committee.

These amendments are safeguards to ensure accountability; to ensure that we are clear about the basis on which algorithms are used; and to ensure that we do not allow them to become the basis of lazy caricatures and stereotypes. Examples have been given by other speakers on this group, but I anticipate that it is possible that the Government might well cite the Equality Act as a guard against such discrimination. However, it is important to note that, although the Equality Act does lots of very good things, it will not necessarily help us here because not all prejudice is reducible to protected characteristics. In fact, attitudes to people on benefits in general and sections of the white working class do not fit into the Equality Act, so it is important that we do not just rely on another piece of legislation here.

Also, if we are going to say that AI algorithms, into which a potential discriminatory nature can be built—as has already been explained—were to make mistakes and discriminate against any group that is covered by the Equality Act, we would be clogging up the Equality Act with lots of legal challenges based on this Bill. I think that using the “reasonable” test for algorithms and ensuring that there is a commitment to no discrimination on the face of the Bill is a very valuable way of countering that.

[Viscount Younger of Leckie (Con)]

My Lords, as the noble Lord, Lord Vaux, said, we are moving towards the DWP elements of the Bill, although I suggest that these particular amendments are more of a hybrid between the Cabinet Office and the DWP. As I think the noble Baroness, Lady Fox, indicated, the DWP elements in scope are universal credit, the ESA and pension credit.

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

My Lords, I will add that to the list of things to write to noble Lords about, if that is okay.

[Baroness Fox of Buckley (Non-Afl)]

It is very reassuring, of course, to hear the Minister, absolutely correctly, insist that individual officers will not choose who to discriminate against. When I supported this, I was not thinking that the officers of the state would necessarily be wandering around with their own prejudices and saying, “nick them” or “investigate them”. I would want to imagine that that would not be the case.

What I think we are talking about here—and this is because the use of technology is so profoundly important to what the Government want to do—is the latent biases in the training data. The connections made between data points are notoriously inaccurate and can be arbitrary, so we are seeking some reassurance here, and I will come back on this in another group. In relation to the accuracy and inaccuracy of algorithms, as I said, last year, two-thirds of the claims flagged by the DWP algorithm as high risk were legitimate in the end, so this is not a foolproof method. Consequently, I am not entirely convinced or satisfied that the Minister has quite answered what the concerns were—certainly that I was raising.

[Baroness Anderson of Stoke-on-Trent]

I am so sorry to have disappointed the noble Baroness, but I will be writing to all Members to answer the questions I have outlined.