Lord Maude of Horsham
Main Page: Lord Maude of Horsham (Conservative - Life peer)Public Authorities (Fraud, Error and Recovery) Bill
Lord Maude of Horsham Excerpts
Lord Maude of Horsham (Con)
My Lords, I apologise for not having been present for the Second Reading debate on this Bill—it is a subject rather dear to my heart—and for not being here at the beginning of this Committee’s proceedings this afternoon. In both cases, I had unmoveable previous commitments. I rise to express broad support for the amendment moved by the noble Baroness, Lady Kramer. She is absolutely right when she says that the Cabinet Office is the right place for a channel of this nature to be located. In later amendments, I will address concerns that the central public fraud authority needs to be empowered to intervene with other departments and be more strongly set up for that purpose. In the context of whistleblowing, I doubt whether it is essential to have this set out in the statute because there is nothing to stop the Cabinet Office setting up such a channel now, but it is an opportunity to ventilate the issue, which we should welcome.
Back when I was the Minister for the Cabinet Office, we were trying to simplify the way procurement was done because one of the unforeseen consequences of having absurdly overbureaucratic and overcomplicated procurement practices was that fraud became easier. When we were trying to simplify how procurements were done, we set up something we called, rather misleadingly, the mystery shopper channel. If bidders or suppliers saw, anywhere in the public sector, a procurement that was being done in the old-fashioned way—excessively prescriptive, rigid and expensive for bidders—they could let us know anonymously. They could tip us off, and the Cabinet Office was then in a position to intervene and draw attention to this—often because it was being done at a relatively junior level, without senior people being aware. So I know from experience that a channel of this nature can be very powerful, and many suppliers are immensely appreciative of the value it created for them. I support the approach that the noble Baroness has taken, and I hope the Minister will take that away.
Viscount Younger of Leckie (Con)
My Lords, I thank the noble Baroness, Lady Kramer, for raising whistle- blowers in respect of the Bill and for highlighting the importance of the protection of those who feel that they must speak out if they see an action or actions that they feel could be fraudulent or not in the public interest. Indeed, it could be actions that should be being taken but are not.
Ensuring that we have adequate protections for whistleblowers is vital to building confidence with the people we need to come forward if we are to tackle fraud. In respect of public sector fraud, such people are employed in local authorities or in the Civil Service. If certain protections are not in place, this can have a detrimental effect on recruitment, retention and perhaps career management.
In tackling fraud, we will inevitably ask—and, in fact, trust and expect—public officials to make the right calls and decisions in their day-to-day work. These decisions can often be incredibly tough, involving sensitive matters and perhaps involving close colleagues. So reassuring public sector workers that they will be protected when they do the right thing is of paramount importance, and we would support further reassurance from the Government that whistleblowers will be protected and supported when they come forward.
Amendment 3, tabled by the noble Baroness, Lady Kramer, presents a sensible proposal for the creation of a whistleblowing reporting channel that would guarantee anonymity and protect whistleblowers, who would themselves be legally defined. The noble Baroness might like to explain in her summing up, however, what she means by
“a process to update whistleblowers in cases of fraud”.
How would she see this work?
On her Amendment 66, we do not think it necessary to establish an office of the whistleblower, although I understand that, as she said, this is very much a probing amendment. It sounds laudable, with laudable aims, but we see this as potential overregulation—the setting up of another body, at an unknown cost and with an unknown number of employees and resources—when we believe that what we need is a proportionate and workable system, as the noble Baroness herself has said in her Amendment 3, and an established process by which fraud is able to be reported with protections in place.
There is a danger that if you set up a body such as a specific office for whistleblowing, you can perhaps unwittingly encourage too many false flags, where whistleblowing is almost encouraged and a bureaucracy is created. It is important that evidence of whistleblowing is protected only where it is substantive and where there are protections in place—not flimsy or based on hearsay, for example. Of course, wrongful reporting can have a devastating effect on people’s lives.
These are really questions for the Government to answer, because the noble Baroness, Lady Kramer, and I share the same objective: pushing and encouraging the Government, in the Bill, to demonstrate practically what actual new protections there are for those who see or perceive fraud in their area of public sector work, bearing in mind that fraudsters can be cunning and clever. It often surprises one who is ultimately seen to commit fraud—it is often in an unexpected area or from people you would never suspect of committing fraud.
I agree with the noble Baroness, Lady Kramer, that it is good to make comparisons with other whistleblowing processes, which she did with a deal of eloquence. I want to make a comparison with the NHS, as I understand that the NHS has upgraded its protections for whistleblowers. Thus Health Education England is listed as a prescribed person under the Public Interest Disclosure Act 1998, which was referred to by the noble Baroness, Lady Kramer. That means that workers at other organisations or companies who wish to raise concerns—in other words, whistleblowing—relating to the education, training and sufficient supply of healthcare workers at their employing organisation or company can do so to HEE. Prescribed persons enable workers to make public-interest disclosures to an independent body where the worker would prefer not to disclose to their employer direct, and the body may be able to take action on the disclosure.
We know that whistleblowing is the term used when a worker provides information to their employer or a prescribed person relating to wrongdoing. The wrongdoing will usually, though not always, relate to something that they have witnessed at work. This is also known as disclosure, which was raised by the noble Baroness as well. To be protected by whistleblowing law, a disclosure must be a qualifying disclosure. That means that the worker making the disclosure believes that doing so is in the public interest and it relates to one of the following categories, which I suspect the Committee will be aware of: criminal offence, breach of a legal obligation, miscarriage of justice, endangering health and safety, damage to the environment and covering up wrongdoing in any of those categories.
Workers have the right not to be subjected to any detriment as a consequence of making a disclosure. To qualify for protection when making a disclosure to a prescribed person, workers must have a reasonable belief that the matter falls within the prescribed persons remit and that the information disclosed is substantially true. Meeting these criteria is referred to as making a protected disclosure. Workers are encouraged to seek independent advice to help consider whether they might meet the criteria for making a protected disclosure. As the Committee may know, that can be obtained from Public Concern at Work or Speak Up or through a legal representative. In addition, HEE is required to report in writing annually on whistleblowing disclosures made to it as a prescribed person without identifying the workers concerned or their employers.
Rather than set up a new whistleblowing body— I have used the HEE as an example—I press the Government to find an existing mechanism, maybe within the Cabinet Office, a body that exists already and can be set up in the public sector and defined as a prescribed person specifically for public sector fraud, rather than setting up a particular office for the whistleblower.
We need to recognise that, although we are asking workers to do the right thing, we are also asking them to do something that is emotionally difficult and distressing. People should be empowered to stand up for the correct use of public money, which can happen only if cast-iron reassurances can be given to them.
With those explanations, I hope the Government will consider these points as they progress with the Bill, focusing on practical, sensible but proportionate proposals that will encourage people—which is the whole point—to come forward when they are made aware of some wrongdoing.
Baroness Finn (Con)
My Lords, our amendments in this group seek to address some of the limitations that the Bill places on the powers of the PSFA to undertake investigations on behalf of the Minister for the Cabinet Office when it is made aware that fraud is suspected or has occurred in a public authority. It is vital that, in further developing this resource, we ensure that it has the powers and the relevant responsibilities to tackle fraud properly and pose a deterrent to those who seek to commit it in our public authorities.
Amendment 4, standing in my name, seeks to probe the circumstances in which a public authority would recover an amount paid in error. It is important that we distinguish, throughout our discussions over these Committee days, between funds that were acquired by deliberate fraud and funds that were acquired because of a mistake. We hope that, in responding to this amendment, the Government are able to make clear their distinction between these two things and how this will be reflected in the exercise of the powers in the Bill.
Amendment 5 removes the requirement that public bodies must first request an investigation into suspected fraud before the Minister for the Cabinet Office may undertake an investigation. The Bill as it stands contains a considerable loophole that can easily be exploited if any public authority wishes to avoid an investigation into its affairs. The PSFA needs to have the legal capacity to undertake proactive investigations into fraud when it is made aware of appropriate instances or concerns. To rely on public authorities that may be conducting illegal activities to find it within themselves to own up before an investigation could even commence is far too weak. We need a counterfraud authority that proactively goes after fraudsters, not one that waits to be invited to investigate.
We are also concerned that the PSFA, even if a case were referred, could simply refuse to take it out of hand. There is no requirement for the PSFA to justify when a case has been refused if it chooses to do so, and we cannot therefore be certain that the information referred would be acted upon. This creates a direct disincentive for organisations to make representations to the PSFA to initiate an investigation. Why risk the reputational damage of an investigation if it could simply be refused for no apparent reason? This is an issue that we will seek to address and that I hope the Government will consider as an amendment to the Bill.
Amendment 6 would enable the PFA to undertake fraud investigations into HMRC and the DWP. This is an opportunity for us to simplify and co-ordinate counterfraud efforts across the public sector. We must ensure that we do not create a two-tier system in which some authorities are accountable to the Cabinet Office and others are not. This amendment would ensure that the PSFA can exercise these powers to prevent fraud and recover funds across these major public bodies to address the asymmetry that the Bill creates.
Our Amendment 7 balances our proposition that the PSFA be empowered to undertake proactive investigations with the control measures that would limit the use of the powers granted under Part 1 by requiring the Minister to be satisfied that there are reasonable grounds to suspect that fraud or attempted fraud has occurred. This test would ensure that investigations could be initiated only on reasonable grounds. The Bill as it stands provides considerable powers to the Cabinet Office in order to combat and prevent fraud. We need to ensure that these powers are exercised responsibly, carefully and for good reason. Our amendment would hold investigators in the Cabinet Office to a higher threshold before they could begin to exercise these powers, which will protect both the Cabinet Office and the people under investigation from abuse.
Finally, our Amendment 8 would ensure that the fee charged to any public authority by the PSFA would not exceed the amount of money that was recovered. This is a sensible amendment that would ensure that a fraud investigation did not come at a net detriment to the public authority. We feel that providing a legal guarantee to public authorities that they will not be left out of pocket as a result of an investigation is an important reassurance that must be made in the Bill.
Our amendments in this group seek to implement sensible, balanced improvements to the powers and role of the PSFA. By allowing this body to undertake proactive investigations into public authorities, which will include the DWP and HMRC, we will close the loophole in the Bill that allows public bodies to dodge investigations simply by failing to request one. This is balanced with controls on the powers of the PSFA requiring a reasonable grounds test to be met before commencing an investigation, and ensuring that any charges made out to public authorities do not exceed the amount of money recovered. We broadly support the Government’s proposition, although we feel that the purpose of this part—to recover money, combat fraud and deter future offences—will be better met if our amendments are incorporated. I beg to move.
Lord Maude of Horsham (Con)
My Lords, I will speak to Amendments 5 and 6 in the names of my noble friends on the Front Bench.
As I have said, I was the Minister for the Cabinet Office for five long years, during the entirety of the coalition Government—I am not sure that anyone else has been there for that long. Despite the best efforts of some in the higher levels of the Civil Service to have me promoted, moved sideways or eventually fired, I survived and outlasted them all. This was when the coalition Government took over—a time of fiscal crisis, with a budget deficit of some 11% of GDP—and it was urgent that the costs of government should be reduced. We were pretty successful in that: we reduced the running cost of government cumulatively over five years by £52 billion. We were DOGE before anyone had thought of it, and, frankly, we did it much more effectively.
One of the elements that we pursued was fraud and error, and indeed debt. We were surprised to discover that activity to counter fraud, reduce error and recover debt was not being seriously co-ordinated. You would have thought that this would be a core function of the Treasury but it was not; the Treasury’s view was that this should all be done in each of the individual silos, and of course that militates against effectiveness.
On the skill sets around countering fraud, et cetera, we concluded that this was a cross-cutting function that runs right across government and needs to be seen in that way. We started to introduce in a slightly makeshift way—piecemeal, making it up as we went along—what we now call the functional model. This is where these cross-cutting functions—procurement, IT and digital, major projects, and HR—are strongly led from the centre of government, with visibility into what is happening in those functions right across the Government. Of course, it is through all those functions, including financial management, that the money gets spent. However, the Treasury’s view, which is true of most finance ministries anywhere in the world, is that it looks at the verticals, and if something is in an approved budget line, that is it—you get on and do what you like.
There is an underlying assumption that all public servants are equally concerned about conserving public money but, regrettably, that is not universally the case. It is essential that there should be proper central oversight. Given the reluctance of the Treasury to take this seriously—as my noble friend Lord Agnew demonstrated vigorously when he resigned in the middle of a speech on exactly this subject, highlighting the reluctance of the Treasury to give it sufficient focus—the Cabinet Office is the place for this to be done. There needs to be proper oversight into how these functions are being run and are operating, and providing some real-time accountability rather than waiting for the Public Accounts Committee some time after the event, generally after the horse has bolted.
That is why allowing the Minister, through the Public Sector Fraud Authority, to intervene only at the request of a public authority seems justifiable in relation to the wider public sector, but in relation to central government departments, agencies, authorities and so on, it seems to be wholly indefensible. There is an assumption that all these authorities and entities will be so concerned to disclose what has gone on in their departments, in their own backyards, that they will willingly ask the Cabinet Office to intervene and be charged a fee for the privilege. I have to say that real life tells us that this is unlikely to happen because we have real-life experience to look at. When, during the coalition Government, it was disclosed that in one major department two suppliers to government had been systematically overcharging that department over not just a short period but a decade or so, it turned out that this had been known about for some time.
Lord Palmer of Childs Hill (LD)
I intervene only because the whole debate on these amendments seems to dwell on what a public authority is. We have heard from the noble Lord, Lord Maude, about the Treasury and central government, but my version of public authority would come down to local authorities, which as far as I am aware are public authorities.
I will talk from experience because I was a councillor in the London Borough of Barnet for 28 years, and for the last four years of that I chaired its audit committee. To my mind, what is missing in the Bill and the amendments is the use of audit procedures, which exist in many public authorities. That is where the investigation should start, at the lowest cost and more effectively.
The noble Lord talks about HMRC. The reason why it failed is that the outside body that had this work subcontracted to it collected the low-hanging fruit. It collected the frauds that were easy to collect because there was money in the individuals, companies or organisations involved. I ask the Minister and her team to think about how to stop attacking only low-hanging fruit. It is the ones that are not dealt with by the existing organisations that we are looking at. Encourage local authorities to set a gold standard where they and anything like them will look at the situation internally and assess where the fraud is. At that stage, it may well be that they want to call in these organisations. The noble Lord, Lord Maude, says they perhaps should not be called in, but they should be if needed. We need to use the things that exist already. To me, the fact that the word “audit” does not appear anywhere here is a negative part of this measure.
Lord Maude of Horsham (Con)
The noble Lord’s point about what we mean when we talk of a public authority is really important. I make a distinction between entities that are part of central government—where the writ of the Cabinet Office and the Treasury should absolutely run without exception for these purposes—and the wider public sector. I believe in localism; local authorities should be responsible for what they do and have access to a centre of excellence of great capability in central government. But there should be a sharp distinction made between central government and the wider public sector.
Lord Palmer of Childs Hill (LD)
My Lords, I apologise; to some extent I moved onto what sounded more like a Second Reading speech, but it comes out of the comments that the noble Lord made. Not just central government bodies but other public bodies must use the investigatory powers, where they are already there, and bring in the heavy guns only when needed. So I accept what the noble Lord, Lord Maude, says.