Public Authorities (Fraud, Error and Recovery) Bill

David Pinto-Duschinsky Excerpts

2nd reading
Monday 3rd February 2025 Commons Chamber

[Liz Kendall]

I will come on to that point in a moment, but I have the utmost respect for my hon. Friend. In fact, I think that the measures in the Bill will help us to spot such errors and prevent them from happening in the first place. People make genuine mistakes. We do not want them to build up errors and build up debt that they have to repay. I think that the Bill is part of solving that problem. I will say more about that in a moment.

I turn to fraud and error specifically in our welfare system. The Bill will modernise and extend the DWP’s anti-fraud powers, bringing it into line with other bodies such as His Majesty’s Revenue and Customs, so that we can use technology and data to find and prevent fraud more quickly and effectively; so that our serious and organised counter-fraud investigators have the powers they need to search premises and seize evidence, including from criminal gangs, and bring offenders to justice; and so that we can ensure that when people owe us money and, crucially, when they can pay, we get that money back for taxpayers. That all comes with strong and new safeguards and with independent oversight on the face of the Bill, as I will set out in detail.

[David Pinto-Duschinsky (Hendon) (Lab)]

As my right hon. Friend mentioned, the Conservatives did not do much on this issue except tagging on a Bill at the very end of their tenure. The Information Commissioner’s Office was very critical of the approach taken in that fraud Bill. Can she reassure the House that she has addressed those concerns?

[Liz Kendall]

I can indeed reassure the House. The Information Commissioner was rightly critical of the last measure introduced by the Conservatives—the third-party data measure. He has written to us today, and we will make sure that his letter is published. He says that he has reviewed our proposals and is very clear that the current measure more tightly scopes the type of information that can and cannot be shared; specifies much more clearly those in the power’s scope; requires a statutory code of practice before measures are taken; and includes a requirement for the Secretary of State to appoint an independent person to carry out reviews of these functions. I am more than happy to publish that and share it with the House, because I think it shows the changes this Government are making.

We are serious about getting these measures through. We understand people’s concerns, and we have addressed them. The Information Commissioner’s letter should reassure the House.

--- Later in debate ---

[David Pinto-Duschinsky (Hendon) (Lab)]

We have heard lots of statistics and detailed policy questions, but I want to start by sharing two stories. The first is of Antonia Foods in Wood Green, north London. From the outside, it looked like a normal neighbourhood corner shop selling fruit, veg and groceries, but from its back room Galina Nikolova and Gyunesh Ali ran a vast fraud operation, making use of transnational networks to file hundreds of illegal UC claims. By the time they were caught, they had defrauded the DWP of over £50 million. When the police finally raided their addresses, they found cases stuffed with cash. Nikolova and Ali received prison sentences, as did many of their associates, but the reality is that most of the money they claimed had long since disappeared, likely spirited out of the country. They had successfully stolen from us all.

The second story is of Yvonne, a disabled woman who was paid thousands of pounds more in benefits than she was entitled to over a number of years as a result of an innocent mistake and is now struggling to make ends meet as the DWP deducts overpayments from her current entitlement. Both those stories illustrate why we so desperately need the Bill.

The extent to which fraud against the public purse spread under the last Government is breathtaking. The proportions are simply staggering. As my right hon. Friend the Secretary of State said, public sector losses amounted to £55 billion last year—as much as the defence budget, and three times what we spend on police in England and Wales. That loss costs every man, woman and child £800 a year and is the equivalent of a third of the entire national VAT take.

This is not a victimless crime or some technical infringement. It robs every family in Britain, erodes our public services and takes money that could be used to help those most in need, depriving the most vulnerable of support. My constituents in Hendon and people across the country rightly expect it to be tackled. This is a crime that feeds on the most disadvantaged and weakens not only public services but the public’s faith in those services and their fairness. I say gently to those who have criticised the Bill that there is nothing progressive and nothing compassionate about allowing fraud to fester. It is a scourge that must be tackled. It is a scourge that grew out of control and was professionalised under the last Government.

Perhaps no area illustrates the challenge that we face, how it evolved and the last Government’s catastrophic failure to kerb fraud better than benefits. The DWP’s net bill for fraud and error, even after deducting underpayments, is £8.6 billion. That is £272 a second, £16,300 a minute and almost £1 million an hour. In the time that it will take for us to have the debate, the DWP will have lost more than £3 million. The bill for fraud and error is roughly the same as the Department’s entire programme budget. The DWP loses as much to fraud and error as it spends on every active programme it has to help the unemployed, the long term-sick, those with disabilities and the elderly. The picture is shocking, and it got much worse under the Conservative party.

The headline figures for fraud and error excluding underpayment tripled in cash terms between 2010 and 2024 from £3.3 billion to £9.7 billion. As bad as those figures are, they actually understate how badly things deteriorated under the Conservatives. Claimant error rose only slightly in cash terms, while official error remained flat. In contrast, fraud rose a stunning sevenfold in cash terms and more than fourfold as a proportion of the total benefits budget. That was not some act of God; it was the result of serial failures by the Conservatives, who failed to understand that fraud was evolving and failed to modernise the DWP’s powers to allow it to keep up in the arms race with the fraudsters. They also made truly terrible policy and design choices that actively fuelled the fraud crisis.

That can be seen nowhere better than in how the Conservatives set up universal credit. Because of their failures in properly establishing and policing its gateway, it became a magnet for fraud. Universal credit accounts for just 22% of benefit spending but contributes over 76% of all benefits fraud. Almost £1 in every £9 claimed through UC in the Conservatives’ last year in power was claimed fraudulently, compared with just £1 in £25 for housing benefit, £1 in £300 for PIP and just £1 in £1,000 for pensions.

The reality is that the Conservatives failed to take the threat of fraud seriously and failed to understand how it was being professionalised and industrialised, as my earlier story showed. They left us all to pick up the bill. They say that they acted, but the truth is they did nothing for years. Even when they finally got their act together at the end of their term in office, it was too little, too late. Once again, we are having to step in to clear up their mess. They owe everyone in the House and everyone in the country an apology. It is striking that in all their bluster during the debate, we have not heard the only word that they should be uttering: sorry.

Fraud exploded on the Conservatives’ watch because of their failings, but the pattern of fraud also tells us much about why the powers outlined in the Bill are so desperately needed. The DWP’s own statistics show that of the £7.4 billion lost to fraud last year, about £1 billion was lost to people who held too much capital to be eligible, £1.3 billion was lost to those who had failed to report their self-employment earnings, and a further £1.3 billion was lost to those who had failed to provide sufficient evidence. A further £250 million was lost to those who were abroad. Those frauds could have been caught with better data and better investigatory powers. It would have been possible for banks to spot people with too much capital to claim, or those with considerable earnings, yet today, because of the last Government’s failure to update their legislation, the DWP cannot compel information digitally.

Virtually all banking is now done online, and yet while fraud is propagated through digital channels and moving at lightning speed, the DWP is still forced to rely on analogue tools. In other fields, we already integrate information and get institutions to work together to prevent fraud. Banks regularly scan patterns that indicate fraud; benefits should be no different. We need digital tools and access to digital data to fight fraud. As with tax, investigators should have the powers they need to recover funds from those who are no longer on benefits. That is why the powers that the Secretary of State is proposing to take are so important as they will allow us to better identify those committing fraud and take more effective recovery action to get taxpayers’ money back.

That brings me back to my second story. Along with the measures that the Chancellor brought forward in the Budget, these measures will help us protect legitimate claimants by helping to pick up overpayments earlier. Last year, 480,000 people had deductions averaging £500 taken from their universal credit payments because of overpayments. Underpayments can be a source of huge anxiety and hardship. Preventing them and catching them earlier will help protect the most vulnerable claimants. That will be possible only because of the better data and the better processes that the Bill will help support.

As we heard from the hon. Member for Brecon, Radnor and Cwm Tawe (David Chadwick), some have voiced concerns about whether the powers proposed in the Bill will impinge on people’s rights. I am strongly reassured by the powerful raft of safeguards that the Secretary of State has included in the Bill. Those safeguards mean that new debt recovery powers will be focused not on those on benefits, but rather on those who are neither on benefits or PAYE, and the DWP will not have access to people’s bank accounts, contrary to what some have implied during the debate. Those safeguards will include independent oversight and options for appeal. I am pleased to hear that, on top of that, the ICO believes that the safeguards address the concerns that it had with the Conservative party’s proposals.

This is a fair and balanced package, which modernises our approach and gives us the digital tools to fight a digital scourge, and the enforcement powers to take on organised crime while protecting the vulnerable. This Government and this ministerial team are modernising our system to protect public money, help the vulnerable and, critically, get Britain working. I am proud to support the Bill.

Public Authorities (Fraud, Error and Recovery) Bill

David Pinto-Duschinsky Excerpts

Report stage & 3rd reading
Tuesday 29th April 2025 Commons Chamber

[David Pinto-Duschinsky (Hendon) (Lab)]

I rise to speak against amendments 2, 4, 5, 6, 8 and 9, and new clauses 12 and 15.

Fraud in the benefit system affects us all. It costs us as a country almost £1 million an hour. It takes money from the most vulnerable in society and undermines the legitimacy of and public support for our social security system. However, many of the amendments proposed simply do not recognise the vital need for this legislation. Some, such as amendments 2 and 9, would hamstring the Bill by preventing us gathering key information. Others, such as amendments 8, 5 and 6, would limit the effectiveness of the Bill and make its powers more difficult to use. Others, such as amendments 4 and new clauses 12 and 15, would seek to delay its effects.

These amendments, however differently proposed, all suffer from the same pathology: they fail to take fraud seriously. We have heard a number of speeches today from opponents of the Bill, but we are yet to hear from them any serious practical suggestions about how we might tackle fraud. These opponents say that they are concerned to protect the vulnerable, but I say gently that they can offer no proposals on how to prevent the fraud that is stealing from the neediest in our society.

Many Members are coming from a genuine place of concern about how to strike the right balance between protecting the public purse on the one hand and the privacy and rights of claimants on the other. I think the Bill gets the balance right. The powers it provides are proportionate.

[Rebecca Smith]

Will the hon. Member give way?

[David Pinto-Duschinsky]

I have limited time, so I will make progress.

The powers the Bill provides are proportionate, measured and ringed with safeguards. It is a mark of this that, as we heard from the Secretary of State on Second Reading, the Information Commissioner has stated that the Bill as currently drafted has addressed their previously stated concerns.

As well as being proportionate, the powers are necessary to fight the ever-more sophisticated frauds that we are facing. Over the past decade, financial institutions have extensively overhauled their use of technology and data and their approaches to the evolving fraud threat, yet the Government have not. It is illuminating, but perhaps not surprising, that while social security fraud has risen dramatically post covid, fraud volumes and losses in the financial services sector, including credit card fraud, have fallen according to UK Finance. The public sector has paid a steep price for not modernising its anti-fraud approach and failing to adopt industry best practices. It is a gap that this Bill seeks to address.

Most of all, the measures in the Bill are crucial for protecting the vulnerable and safeguarding the legitimacy of the system itself. Our social security system rests on public consent and a belief that money is fairly spent. Fraud and error chips away at this social contract, and it takes money from those who need it most. The public in Hendon and across the country expect us to take action. There is nothing progressive whatsoever about permitting fraud. The only people who benefit are the criminals who exploit our system and those who wish to undermine its role as a cornerstone of a civilised and fair society.

For the sake of the most vulnerable, the taxpayer, fairness and the system itself, I hope the House will join me in supporting the Bill and voting down those amendments.

[Kirsty Blackman (Aberdeen North) (SNP)]

There continue to be many problems with the Bill, but I recognise that the Minister and his team have had extensive conversations with the Scottish Government and made a number of amendments as a result. I welcome the communication between the two Governments and urge the Minister to ensure that the DWP team have extensive conversations in advance of the coming welfare Bill so that it will not need so many Government amendments on Report for how it interacts with Scottish legislation and Scottish systems.

I turn to new clause 1 on carer’s allowance. It would be completely fair to wait until a review has been done—there needs to be a significant look into that—as clawing back money from people without seeing the results of that review would be incredibly problematic. I am therefore happy to support the new clause.

On sickfluencers, I am concerned that although the shadow Minister has tried to draft new clause 21 to exclude people giving advice, it might unintentionally catch some of those people. On that basis, I am not keen to support it as I would be worried about people who offer genuine advice being caught up in that. However, I understand that she attempted to draft it carefully to try to avoid that.

I would be more than happy to support amendment 11 —the SNP will support it—on the suspicion of wrongdoing. I am thinking in particular about the speech made by the right hon. Member for Hayes and Harlington (John McDonnell). I was not going to mention the propensity of former MPs to claim things fraudulently, but in looking at who actually costs the taxpayer significant amounts of money, if the Government were to say, “We know that people who hold millions of pounds in offshore trust funds often dodge tax, so we are going to survey all their bank accounts,” I imagine that there would be some sort of uprising, particularly from some wealthier people we are aware of. But because the Government are saying, “It’s cool; it’s just poor people who will be impacted,” we are all expected to assume that this surveillance is fine. It is not fine; it is an absolute imposition on people’s lives. As many have said, it is treating everybody as though they are fraudsters.

Let us look at the amount of money set to be saved. The Government will save less money annually than the DWP makes in overpayments. Rather than imposing on so many people’s civil liberties, surely cracking down on DWP official error overpayments, which would save more money, would be a better place to begin. It is absolutely daft.

I completely agree with new clause 7, tabled by my colleagues the hon. Member for Brighton Pavilion (Siân Berry), particularly in relation to the reasonable expectation that people could understand that they had been overpaid. A constituent contacted me recently because they had a letter telling them that they are to be migrated to universal credit. They are terrified that they will be deported because the word “migrated” was used in that letter. They do not understand the language used by the DWP. Given that universal credit is so complicated to calculate, so many people could not reasonably have been expected to understand that they were being overpaid. The DWP should take that into account before looking at mass surveillance.