Public Authorities (Fraud, Error and Recovery) Bill

Baroness Stedman-Scott Excerpts

2nd reading
Thursday 15th May 2025 Lords Chamber

[Baroness Stedman-Scott (Con)]

My Lords, I thank the Minister for her opening speech in outlining the purpose of and some of the details contained within the Bill, and for all the engagement from her and the noble Baroness, Lady Sherlock, who I think is in the running for a new job, closely followed by the noble Baroness, Lady Alexander. My noble friend Lady Spielman is hot on the heels. We greatly appreciate the engagement we have had, and it has been very helpful.

I also pay tribute to my noble friend Lady Spielman on her maiden speech. It was excellent, and I know that others in the House will join me in welcoming her to these Benches. I hope that my noble friend has got the message loud and clear: we are pleased to see her. The words that describe her—substance and integrity—are absolutely accurate.

I will be clear from the outset: this side of the House supports the principle of this Bill. Fraud against the state is unacceptable and tough measures that we can legislate for in this place to crack down on disreputable people and fraudsters who steal from the public purse are not just welcome but essential. We have a moral and fiscal duty to address this, and I echo the point raised so eloquently by the noble Baroness, Lady Alexander. The moral aspects of the Bill were also well referenced by the noble Lord, Lord Rook.

The proposals before us were, broadly, introduced to Parliament by the previous Government. I was disappointed that, in the other place, the Minister refused to acknowledge our shared ambition on this Bill. Although we are on the same page as the Government when it comes to preventing fraud, we have some serious and genuine concerns, and many questions about how this objective can be achieved, given the Bill before us.

One key question that these Benches have is on the level of ambition the Government have to combat fraud. Fraud is a very serious matter, which needs to be addressed robustly. We lose a total of £55 billion a year to fraud across the public sector, but the Bill before us is set to recover only £1.5 billion. This is 2.7%. Can the Minister tell us why the anticipated returns, as a target number, are so low? Perhaps His Majesty’s Government would like to go away, rethink the target and up their game.

The Government seek to target three forms of welfare benefit through the provisions set out in the Bill. Can the Minister tell us how much each of these benefits contributes to the overall figure for public sector fraud? Can she also provide a breakdown of these figures, covering all welfare streams, to the House for our review and in preparation for Committee?

Another question we have is why certain aspects of the Bill are not ready, notably the Cabinet Office proposals. We have seen this already with the Employment Rights Bill, to which literally hundreds of government amendments have been added to try to correct errors in the drafting of the legislation.

I could not have put it better than the noble Lord, Lord Vaux: His Majesty’s Government need to get their act together on impact assessments. Do we really think that it is a good idea to lose his skills and that of other hereditaries, on such important legislation? I leave that with your Lordships. The Bill is being introduced without key impact assessments being available. We have no impact assessment measuring the cost to banks or to the DWP, the projected return on investment or the cost per head throughout the entire process. As we do not have these assessments, we will be discussing proposals with much of the relevant information unavailable.

It would also be incredibly helpful for noble Lords to have a breakdown of the fraud figures that the Government referenced throughout the passage of this Bill in the other place. Knowing the details of the challenge we face will allow us to make a better assessment of where this Bill can be improved to better meet that challenge. I hope that the Minister can provide this information to the House soon. Having it to hand is vital in allowing us to do our jobs properly. It simply is not good enough that we should scrutinise these proposals without the information that we need to make an informed decision. I reiterate to the Minister that we want to work collaboratively with the Government to improve the Bill.

I will start by covering the chapter of the Bill that relates to the Cabinet Office. The intention of the Bill to combat fraud in government departments is noble, and we have already had unanimous support from across the House. However, we are concerned that these proposals do not go far enough, for reasons that I shall now outline.

The changes to the Public Sector Fraud Authority—like others, I will jump on the bandwagon and call it the PSFA—are a concern for us. This enforcement unit currently has 25 staff. The authority is rightly tasked with investigating fraud across every department—a massive undertaking. As the noble and learned Lord, Lord Garnier, raised, is the Minister confident that the PSFA’s resources are sufficient? I mentioned returns of 2.7% earlier; as my noble friend Lady Finn said, the returns specifically expected from the PSFA are far lower than that—around 0.002%. How much resource would the PSFA need to make returns of 25%? The Minister said that the Government will scale this operation, but we need to know how this will work if we are to approve the proposals now.

My noble friend Lady Coffey made the point that the Bill does not go far enough. Her point about percentages and cash is real, and we need to address it. If the PSFA is to be expanded to meet the increased workload it will soon encounter, can the Minister tell us how this appointment process will work and who will oversee it? Can she please outline the timelines we can expect for when she anticipates the PSFA will be scaled up, and how quickly it will be fit for purpose, effective and achieving results?

Furthermore, we have some serious questions over the independence of the PSFA. It is right that the Government are incorporating a provision in the Bill to make it an independent body. However, it is still subject to powers that go up to the Minister responsible in the Cabinet Office. Government departments are marking their own homework, and we have no actual guarantee that the PSFA will be independent. This should be in the Bill from the start and not down to the arbitrary discretion of the Minister. Can the Minister confirm that the PSFA would become independent from the Cabinet Office?

It is unacceptable, in our view, that the process of recourse for those who want to appeal should be in a straight line back to the Minister. As my noble friend Lady Finn said, recourse processes should be independent, and we want to again emphasise that recourse should be through an independent tribunal mechanism and not back to a politically appointed person—someone, clearly, with vested interests.

This all relates to a wider point about the ultimate purpose of the authority. The PSFA has an important task to perform, and we on this side of the House support the Government’s intention to introduce a six-year extension up to 12 years, but can the Minister give a timeline as to when it is expected to conclude its work? I wonder how the Government would react to a proposal of a sunset clause to the authority, so that there is no risk that these powers are held indefinitely beyond the period for which they are reasonably required.

Points were raised on whistleblowing protections by the noble Baroness, Lady Kramer, and the noble Lord, Lord Palmer of Childs Hill. As my noble friend Lady Finn has already made clear, the Bill relates to situations where people could be asked to make very difficult, stressful and worrying decisions. It is easy for us to talk about this in academic terms but whistleblowing is far from easy, and we need to do all we can to support those who stick their necks out to do the right thing.

The Government have made it clear that they believe that existing protections are enough, although a recent National Audit Office investigation into whistleblowing in the Civil Service highlighted serious shortcomings, showing that it is even harder than it has been to call out wrongdoing. The NHS has rightly strengthened its whistleblowing safeguards, and these issues are being addressed elsewhere in our state system. We on these Benches believe that the same support needs to be given to civil servants working in this sensitive area, covering both the Cabinet Office and DWP aspects.

I turn to the part of the Bill which relates to the Department for Work and Pensions. We on these Benches also firmly support measures to crack down on those people who abuse the welfare system. For some people in our society to steal from a system that is designed to support the most vulnerable is a truly despicable act, and we need to stop those who do that as a matter of urgency.

I have no desire to upset the noble Lord, Lord Davies, but I must say that the Minister the noble Baroness, Lady Anderson, mentioned driving licences; what about passports, too? The noble Baroness looks after child maintenance; I looked after it, under the guidance of my noble friend Lady Coffey, and we took away driving licences and we took away passports. How many do you think we took away? Less than five, because it was a deterrent. So, please, think twice before everybody knocks this. I want to make myself available to the Minister, because I have got a load of other ideas for deterrents, and I am telling you they will work.

The Bill proposes a substantial increase to the DWP’s workload and, from what I understand of the detail that the Government have outlined, the DWP can expect to receive thousands on thousands of signals from banks flagging potentially fraudulent activity. These will then have to be individually checked by a human being. The Government have rightly said that they will approach this with a deep attention to vulnerability. We must welcome this. This was also raised by the right reverend Prelate the Bishop of Lichfield, but does this mean that DWP civil servants will be checking not only the movement of money into an account but also whether the person in question is someone with a disability—in other words, perhaps someone with reduced capacity or someone who is at risk of being coerced? None of this detail is clear, and the Government have failed to publish an impact assessment showing the cost of this additional work.

It is vital that these wider considerations are taken into account. We need to distinguish between those who are committing fraud intentionally and those with reduced capacity and additional needs who may not realise that what they are doing is fraudulent. We also need to consider wider circumstances. If a suspected fraudster is in fact a woman trying to save money to escape an abusive relationship, we will be doing far more harm than good by stripping this money away. How can the Government ensure, under the provisions in the Bill, that vulnerable people will be supported and not debanked?

If the Government in fact intend to proceed in the way that I have outlined, we are talking about literally thousands of hours of additional work. Can the Minister please tell us how the DWP intends to meet this increased workload, how much it will cost and whether she is certain that the additional cost of meeting this demand will be worth the revenue we save by tackling fraud in this way? We shall be paying close attention to this as we progress to Committee.

I now want to say something about the use of artificial intelligence to improve investigatory performance—this was raised by the right reverend Prelate—and about technology, a point that was raised by other noble Lords. We would support the use of new techniques to improve efficiency, but they should be subject to close oversight. We are talking about personal, confidential financial information. Can the Minister assure the House that any use of AI will be subject to rigorous safeguards, and will she commit to coming before the House again to set out how these will work and how the Government will guarantee security to the owners of that data?

Many of the same questions remain over the role of banks. The Bill places a significant burden on banks, which, it appears, are being asked to devote resources to this system out of a sense of moral duty, as, in dedicating staff and systems to the Government’s plans, they forego considerable opportunity costs which will not be recovered. This may be right in principle, but for financial institutions the bottom line is always the determinant factor. Can the Minister please update the House on how much these new responsibilities will cost banks? I know that the figure will ultimately depend on demand, but can the Minister tell us the cost per head, which the department will, I hope, know? Do the Government have an impact assessment prepared for banks, showing them how much this will cost them? If more work than anticipated emerges, what arrangements are made for paying for this?

I am greatly concerned that these proposals are being put before the House while talks with banks are still ongoing. The Government have not come into this as prepared as I believe they should; we should know what the settlement is before we start discussing the Bill; and the fact that it is still a moving picture is deeply worrying when we are being asked to enshrine this in law. These are important questions, and I hope that the Minister can shed some light on them for the sake of business and, fundamentally, the taxpayer. We will be testing the Government in Committee on all these aspects.

Arguably, the most fundamental provisions in this Bill relate to enforcement. People need to know that, if they commit fraud, they face a genuine and real risk of retribution. One of the issues that we have identified is that the DWP will be able to assess activity only in one bank account—this point has already been raised—which is the bank account that benefits are paid into. As soon as the Bill is passed, fraudsters will realise that all they need to do is open a new bank account and move the money over; then they are completely safe. Bank accounts can be set up in minutes from a smartphone, as highlighted by my noble friend Lady Coffey, so a fraudster could circumnavigate the DWP and all the measures in this Bill on their phone in the space of a single Tube journey. They would be completely safe in the knowledge that the DWP legally cannot pursue them any further.

This brings me back to pilot schemes. Can the Minister please publish the results of these important schemes? I have a hunch that they might highlight some of these issues. Closing this loophole is the only way to make sure that the Bill works at all, which is another subject for debate in Committee.

Finally, on a very serious matter that is a plague on society, I turn to so-called “sickfluencers”. These are people who use social media sites to spread information on how to defraud the benefits system. This sort of behaviour simply has to stop. People across the country are gaining substantial online followings. People consume their videos instructing them on how to defraud the benefit system. Sickfluencers provide model-aware answers, highlight keywords and openly boast that their script will win a claimant the maximum number of points in their welfare assessment. We need to be clear that this sort of behaviour is designed to circumnavigate the rightful checks that are in place and enable fraud.

The Fraud Act 2006 and the Serious Crime Act 2007 provide a useful framework for tackling this, but we are concerned that those measures are not sufficient to police this sort of behaviour adequately. The Government have said that they want this Bill to modernise powers, and we believe that this is an area where modernisation needs to take place. We will therefore be paying close attention to this Bill in Committee and seeking cast-iron assurances from the Government. We simply want to ask what the Government will do to tackle this threat. How many sickfluencers have been detained under the current legal regime? Either the current legal framework is inadequate, or the powers are not being used.

In conclusion, I reiterate our intention to work with the Government to ensure that this Bill is fit for purpose. I look forward to hearing the Minister’s answers to the points that I have raised. We believe that the issues that we have highlighted are fundamentally important to making this Bill a success, and we shall be pressing them in Committee if needed. I can see why the noble Baroness, Lady Fox, concluded that this Bill was not so dull after all. I thank all noble Lords who have contributed to the debate thus far. We genuinely look forward to engaging with Peers, the Minister and her team as the Bill progresses.