Public Authorities (Fraud, Error and Recovery) Bill

Lord Palmer of Childs Hill Excerpts

Committee stage
Wednesday 11th June 2025 Grand Committee

[Lord Vaux of Harrowden (CB)]

My Lords, I was not going to speak on this group, but, as the noble Baroness, Lady Anderson, proved the other day, Amendment 60A is not necessary because Clause 12 sets out clearly that these orders can be used only where there has been a final determination of the amount owing by the court or where it has been agreed.

However, I support Amendment 61A. Frankly, it is becoming a bit of a weakness in an awful lot of areas that the impact assessments that come with legislation are regularly quite poor. It is incredibly important that, when we make regulations that will have impacts on people, we understand what those impacts are.

I have one other question that I probably should have dealt with by means of an amendment, but I have only just spotted something. Why are regulations made under Clauses 37(2)(c) to (f) subject to the negative procedure and not the affirmative procedure?

[Lord Palmer of Childs Hill (LD)]

My Lords, the amendments tabled by the noble Baroness, Lady Finn, and the noble Viscount, Lord Younger of Leckie, raise important considerations about procedural fairness and transparency in the implementation of the Bill. Amendment 60A, which would allow applicants to request a review into the existence or value of the payable amount, would provide a valuable safeguard, ensuring that individuals have an accessible means to challenge decisions where there might be uncertainty or dispute. This aligns well with the principle of natural justice and could help prevent errors going uncorrected.

Amendments 61A and 61B focus on the mechanisms surrounding direct deduction orders, emphasising the need for accountability and parliamentary oversight. Requiring an impact assessment to accompany any changes to the processing of these orders, as proposed in Amendment 61A, would encourage transparency about the potential costs and effects on banks’ operational capacity. Similarly, Amendment 61B’s provision that consultation outcomes must be laid before Parliament prior to implementation would ensure democratic scrutiny. Together, these amendments would contribute to a more open and considered approach, balancing the efficient recovery of public funds with the need for oversight and due process, and I support them.

[Baroness in Waiting/Government Whip (Baroness Anderson of Stoke-on-Trent) (Lab)]

My Lords, this has been a helpful and constructive debate. I shall just clarify some points that have been made and respond directly to some of the questions. I think I can answer them all; if not, I will reflect on Hansard.

Amendment 60A would enable the liable person to appeal against the existence and value of what they owe as a result of fraud or error as part of the appeal process for direct deduction orders. I remind noble Lords that direct deduction orders are used only if a liable person has opted not to come to the table and negotiate. This is not the first way in which we would have engaged; it is at the end of a process.

--- Later in debate ---

[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.

--- Later in debate ---

[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.

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

My Lords, these amendments all pertain to the scope, application and oversight of the civil penalties measures. The measures have been designed using established cross-government best practice so that the PSFA may effectively deter and recuperate money lost to fraud and include numerous safeguards for individuals and businesses.

I find myself in the unique position, so far in this Committee, of agreeing with the noble Baroness, Lady Fox, although maybe not for the reasons that she set out, on Amendment 63A, which would unnecessarily extend the legislation by adding a definition of “help” to Clause 50. The Fraud Act 2006 establishes the fraud offence, which includes an individual making

“a gain for himself or another”.

The Fraud Act does not define “help” in terms of making a gain for another. This is because the Act focuses on the “dishonest intent” of a fraudulent act. Under Clause 70(1)(c), the offence at common law of conspiracy to defraud is already punishable under the Bill. Clause 70(1)(b) includes and covers Sections 6 and 7 Fraud Act offences. This allows for penalties to be issued against the fraud “influencers” we have already discussed during the Bill’s passage. The offence at common law of conspiracy to defraud is also already included in our definition of fraud. It is therefore unnecessary to define “help” in order to use either the Fraud Act or this Bill, although I was very tempted to quote Beatles lyrics—that may just be the time of day.

Amendment 63B would amend Clause 52 by replacing the Minister with the First-tier Tribunal in cases where a fraudster attempts to take public money but is stopped before they receive the payment. There is existing precedent for not using the First-tier Tribunal as the first-instance decision-maker: for example, in the Home Office for the employment of illegal workers. The legislation also includes the right to appeal a decision to the appropriate court following the receipt of a final penalty notice—I will come on to that.

Amendment 63C seeks to broaden the requirement of Clause 58(4) beyond Clause 58(2)(c) so that it may apply to Clause 58(2)(a) and Clause 58(2)(b). This is unnecessary, as Clause 58(3) already requires the Minister to give notice to an individual if the penalty is upheld. While I recognise its intent, it is unnecessary to include Amendment 63D in the Bill. While there is no obligation under common law to provide an explanation for a positive decision—that is, to amend or cancel the penalty—authorised officers will do so as part of the review process. They will also provide an explanation for a decision to amend or cancel the penalty as part of the review process. The civil penalties code of practice and further guidance will support authorised officers.

Amendment 64A would add additional unnecessary complications to the legislation. It is the intent of the legislation not that regulations may be made to reduce or abolish the appeals provisions for penalty notices but that any further regulations may improve, streamline or make the appeal process more efficient. For example, appeals for civil penalties may be heard at the same time as appeals against debt recovery notices.

I turn to the specific points raised by noble Lords. In response to the noble Baroness, Lady Finn, I remind the Committee that the tribunal appeal is already in the process at a later stage, that of determining the penalty. Bringing the tribunal in earlier would add time and burden. I think that I have covered the other points in my speech, and the noble Baroness, Lady Finn, will remind me if I have not—she may be about to—but I hope that my explanations reassure noble Lords and that the noble Baroness will therefore withdraw her amendment.

--- Later in debate ---

Moved by

[Lord Palmer of Childs Hill]

65: After Clause 63, insert the following new Clause—
“Report on public sector fraud during COVID-19 pandemic(1) The Minister for the Cabinet Office must, within six months of the passing of this Act, lay before Parliament a report evaluating the extent of public sector fraud that occurred during the COVID-19 pandemic.(2) The report must include—(a) an account of fraudulent or erroneous payments made by or on behalf of public authorities, including but not limited to the Department of Health and Social Care and NHS England,(b) a review of how public procurement practices in place between March 2020 and December 2021, including—(i) the use of high priority and expedited contracting for suppliers, and(ii) the role of political appointments and personal connections in procurement decisions, may have contributed to fraud against public authorities,(c) the cost to the public purse of fraud against public authorities during the COVID-19 pandemic, and(d) an assessment of the adequacy of Government oversight and other measures then in place to prevent fraud against public authorities.(3) Where the report finds or concludes that there were—(a) failings in Government oversight and other measures then in place to prevent fraud against public authorities, or(b) any action or inaction by the Government which enabled fraud against public authorities,the Minister must make a statement to the House of Commons acknowledging these findings and setting out actions planned to ensure any failings are not repeated.”

[Lord Palmer of Childs Hill (LD)]

My Lords, Amendment 65 in my name would require the Minister for the Cabinet Office to,

“within six months of the passing of this Act, lay before Parliament a”

comprehensive

“report evaluating the extent of public sector fraud that occurred during the COVID-19 pandemic”.

The Liberal Democrats have long championed transparency, accountability and robust oversight of public funds. This amendment aligns with those values by ensuring that Parliament receives a clear, detailed assessment of how fraud had an impact on public resources during an unprecedented crisis. Without such transparency, we risk missing critical lessons that could inform future safeguards and improve the resilience of our public sector. The pandemic presented unique challenges that, unfortunately, created opportunities for fraud on a scale not previously seen. It is only right that we fully understand the scale and nature of the issue, not to assign blame but to strengthen our systems and protect taxpayers’ money.

This amendment reflects the Liberal Democrat commitment to evidence-based policy and open government. By requiring this report, we would promote accountability and ensure that future emergency responses are better equipped to prevent fraud, protecting public trust and ensuring that resources reach those who genuinely need them. There will be other events; we want to set the scene so that they can be dealt with. That is what this amendment seeks to do. I beg to move.

[Baroness Coffey (Con)]

My Lords, I rise to speak to this amendment because I was at the Cabinet table when Covid-19 hit this country. I am very conscious of the arduous activity that went on among brilliant civil servants but, of course, mistakes were made, as well as successes.

It is interesting to try to understand why the noble Lord, Lord Palmer of Childs Hill, wants to go into this matter further, recognising that, in Parliament, there have already been several Select Committee inquiries; one was specifically done on fraud. Of course, we also have the public inquiry that is under way, to which the Government are contributing. I am trying to understand the purpose of this amendment and this extra report, recognising that the Government will in no way make any comments until the inquiry has concluded.

My understanding is that the inquiry is still going to take evidence in 2026. For what it is worth, as I am sure the Ministers here will be relieved to know, I am absolutely convinced that this Bill will become an Act of Parliament well before the end of 2025. So there is something here of an odd overlap. I understand that this will continue to be a subject of interest.

This is quite a wide ranging-element. I know that fraud happened. There is no doubt of that. However, we also averted fraud in the DWP. We managed to stop £1.6 billion going out on one particular weekend by intervening. There were plenty of attempts at fraud and, unfortunately, there were successes. Some of those people who committed that fraud are now in jail, thanks to the endeavours of the Government.

The noble Lord, Lord Palmer of Childs Hill, talks about resources that the country may have been deprived of when addressing the issues of Covid. I can honestly say to your Lordships that no resources were set aside at all. This is one of the reasons why there have been considerable challenges on aspects of needing to repay the debt that may have been acquired due to spectacular extra financing, whether that was through businesses or about people who had never claimed benefits in their life before, making sure that they got the money that we believe they were entitled to. That was while recognising that some of the easements initially may have been subject to some fraud, but we also made every effort to try to stop it. I have already given an example of where, in one weekend, £1.6 billion was averted.

For that purpose, the amendment genuinely is unnecessary. The statutory inquiry, I hope, will not be the longest-running statutory inquiry because that is not what the country needs to consider. It would not be the best use of government resources to initiate their own further inquiry and honour this amendment.

--- Later in debate ---

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

My Lords, this is what I can say currently, but if there is additional clarification, I will come back to the noble Baroness. Mr Tom Hayhoe’s appointment is a fixed one-year appointment. He will be required to provide a report to Parliament, which will present lessons and recommendations for procurement in future during a time of national crisis, so he will be reporting on his efforts outside and within the Treasury.

[Lord Palmer of Childs Hill (LD)]

My Lords, I have a rearguard action on this amendment, because it seems strange to me—and it may seem strange to anybody among the public—that we can have a Bill called the Public Authorities (Fraud, Error and Recovery) Bill, but we do not recognise within that Bill one of the biggest efforts of fraud that occurred in this country during Covid-19. Those still rumble on—those billions of pounds. For a Bill called the Public Authorities (Fraud, Error and Recovery) Bill not to include those is a grave error.

There may be some crossover and duplication, but if there is, it does not matter, because it is in the Bill and the Government will not have to pursue things if they are being dealt with elsewhere. They may be dealt with elsewhere, but there has to be a backstop, and the backstop should be in this Bill. It will do no harm in future to have it in the Bill, even if other things may address the problems that occurred and could, sadly, occur again when another event takes place. Having said that, I beg leave to withdraw the amendment.

Amendment 65 withdrawn.

--- Later in debate ---

[Baroness Finn (Con)]

My Lords, our Amendments 67 and 68 in this group work together to introduce new clauses on annual reporting obligations under the Bill: first, on the use of powers conferred by Part 1 and, secondly, on the extent of fraud against public authorities. These are, on their face, modest amendments: they do not alter the structure of the Bill; they do not restrict the powers being granted; and they do not place unreasonable burdens on Ministers or departments. They are grounded in a principle that is both simple and fundamental to good governance: that Parliament and the public have a right to know how powers are being used and whether those powers are making a measurable difference.

Amendment 67 would introduce an annual reporting requirement on the use of powers conferred under Part 1. This part confers significant powers: powers to impose penalties, to recover funds, to compel the provision of information and to act across a broad range of public authorities. These are substantial tools in the Government’s arsenal against fraud and error, and we all agree that public money must be protected and those who exploit or defraud the state must be held to account.

But power must always be accompanied by oversight. The public has a legitimate interest in how these tools are used, how often, in what context and with what effect. An annual report will provide that vital lens of scrutiny. It will allow Parliament to see whether the powers are being exercised proportionately and effectively and whether any patterns or concerns are emerging that warrant further attention. Without such reporting, we risk creating a system where power operates behind closed doors: not necessarily abused, but unexamined; not necessarily misused, but not explained. That, over time, can erode public trust not just in anti-fraud enforcement but in the fairness and accountability of public administration itself.

This amendment would simply require the Minister to prepare and publish an annual report on the use of the powers granted under Part 1, beginning within 12 months of the commencement of Clauses 1 and 2 and continuing annually thereafter. The report must then be laid before both Houses of Parliament within seven days to ensure that this information is not only collected but promptly placed in the public domain.

This is not bureaucratic clutter; it is democratic hygiene. It provides Parliament with the tools that it needs to track the implementation of this legislation and to hold the Executive to account. It allows Select Committees, Members of both Houses and the public to ask informed questions and pursue necessary follow-up, where appropriate.

The second amendment, Amendment 68, complements the first by requiring an annual report on the estimated scale of fraud against public authorities, based on the Government’s internal estimates. We have heard repeatedly, both in this Committee and outside it, that public sector fraud is a serious and growing challenge, yet it remains notoriously difficult to quantify. Estimates vary, methodologies differ and the scale of undetected fraud, by its very nature, is hard to pin down.

Nevertheless, if we are to take the fight against fraud seriously, we must begin by being honest about the scale of the problem. This amendment would compel the Government to do just that—to report annually on their internal estimates of fraud against public authorities and to lay those findings before Parliament. Without a clear sense of the scale of fraud, we cannot effectively assess the return on investment in anti-fraud measures, we cannot identify which sectors are most at risk and we cannot hold departments to account for their own controls and responses.

Just as importantly, regular public estimates create pressure for improvement. When departments know that the levels of detected or suspected fraud will be publicly disclosed, they have a strong incentive to strengthen internal controls and to invest in fraud detection systems. The result is not only transparency but improvement in practice. This principle speaks to the heart of another one of our goals: that public authorities take increasing responsibility and ownership for identifying and tackling fraud internally. This amendment is a mechanism that would promote this.

It is worth emphasising that this amendment does not require, unfortunately at present, perfect precision. It does not ask the Government to do what is not feasible; it asks for a summary of internal estimates informed by the Government’s data, audits and risk assessments. That is both reasonable and achievable. However, I take this opportunity to call out that data should be improved. The variances in the estimates currently produced by the Government are massive, and it is clear that the Government themselves do not have a particularly accurate view of the challenge that we face. The Government must achieve more accurate data reporting in this area and make this available. We need to strive for a situation in which good, accurate data is provided to Parliament, not the wildly varying estimates that we currently see.

Ultimately, we cannot allow the state to hide behind averages, yet that is precisely what it does. It is all too easy for the Government to delay publication of the annual fraud landscape report; when it does appear, it risks being only the most convenient version of the truth—aggregated figures, smoothed-out estimates and numbers stripped of detail with no departmental breakdown, timeline or accountability. That is not transparency; it is evasion. A Government who lose billions to fraud cannot be allowed to drip-feed the facts on their own terms.

Together, these two amendments serve a broader purpose. They ensure that this legislation not just empowers the state to act but commits the state to account for how it acts and to explain whether its actions are having the intended effect. They are not burdensome or oppositional; they are the kind of clear, regular reporting obligations that should be part of the design of any legislation that grants wide-ranging enforcement powers and seeks to solve systemic problems. Let us remember that the effectiveness of anti-fraud efforts cannot be judged solely by the strength of powers on paper; it must be measured by their use in practice and by the visibility of that use to those whom the powers are ultimately meant to serve—the taxpayer and the public.

Transparency is not a hindrance to enforcement; it is an essential condition of its legitimacy. These amendments would not hinder the Government’s ability to act. On the contrary, they would enhance its credibility in doing so. They would signal to the public that the Government are not only determined to tackle fraud but willing to be open about their efforts and accountable for their progress. They would allow Parliament to play its rightful role in monitoring implementation, asking the right questions and proposing further refinements when necessary. In an age when public trust in institutions must be earned and re-earned, these small acts of transparency are the building blocks of that trust.

I urge the Minister and noble Lords across the Committee to support these amendments as practical, principled and proportionate contributions to a more transparent and effective anti-fraud regime. I beg to move.

[Lord Palmer of Childs Hill (LD)]

My Lords, these amendments are very close to my party’s heart. I warmly welcome Amendments 67 and 68, which would place an important emphasis on transparency and accountability by requiring the Minister to publish annual reports on the use of powers under Part 1 of the Bill, as well as on the estimated scale of fraud against public authorities. Too often, no one knows about the scale.

These measures represent a vital step forward in ensuring that Parliament and, by extension, the public, receives regular, detailed information about how these powers are exercised and the ongoing challenges faced in tackling fraud. Such openness is essential because it is openness that solves these problems, builds trust in the administration of public funds and allows for informed scrutiny and debate. From my party’s perspective, these amendments align closely with our long-standing commitment to open government and evidence-based policy-making. By mandating annual reporting, they would help to illuminate the practical impact of the Bill and provide the data that is necessary to assess whether these powers are effective, proportionate and fair. This ongoing oversight will be invaluable in refining approaches to fraud prevention and recovery and ensuring that public authorities are both empowered and held accountable.

I look forward to supporting these amendments as the Bill goes forward, as well as to continuing to work to strengthen transparency and public confidence in this important area.

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

My Lords, I thank the noble Baroness, Lady Finn, for raising the important issue of the annual reporting of the PSFA on both the use of the powers conferred on it in the Bill and the extent of fraud against public authorities.

Under Clause 64, an independent person will be appointed through the office of the Commissioner for Public Appointments as a regulated appointment to oversee the use of the powers that this Bill conveys on the PSFA. We will appoint someone with the right skills and demonstrable independence. The independent person will proactively review the PSFA’s investigative functions and use of powers, which will culminate in regular reports being produced on an at least annual basis for the Minister for the Cabinet Office.

I know that the noble Baroness cares about ministerial oversight and accountability. The powers granted to the Minister for the Cabinet Office will be delegated to trained authorised officers; I can assure her that there will continue to be strong and regular ministerial oversight of their safe and effective use. Once the Minister has reviewed the report, it must be laid before Parliament. Reports will both provide assurance on where powers are being used appropriately and challenge where improvements could be made, ensuring that civil servants are using the powers in this Bill as intended. They will provide assurance that suspected cases of fraud are being investigated in accordance with the legislation, codes of practice and guidance; and that that is being done effectively in the pursuit of the intentions of the Bill.

The findings or summary of any and all independent oversight, including the independent person’s report, will be published on an annual basis in the interests of transparency. External oversight bodies will also report on the use of powers by the PSFA following inspections. These reports will be made publicly available. With regard to annual reporting on the extent of public sector fraud, the PSFA oversees the counterfraud performance of ministerial departments and public bodies. It already publishes a report on the extent of fraud against public authorities: the Fraud Landscape Report. I hope that that reassures noble Lords.

I want to address one point made by the noble Baroness, Lady Finn, on how the Government estimate the level of unknown fraud and error. The best available evidence suggests that the level of fraud and error in unexamined areas of government activity is between 0.5% and 5%. This is based on a Cabinet Office review of around 50 fraud and error estimates that includes every major department. Methods used across government to estimate the extent of fraud and error include statistical sampling, modelling and benchmarking. More detail can be found in the NAO report.

There are already provisions to review the use of powers the Bill conveys on PSFA and reporting relating to counterfraud activity across government. I hope that this explanation reassures noble Lords and that the noble Baroness, Lady Finn, will withdraw her amendment.

--- Later in debate ---

[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.

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

My Lords, all the amendments in this group relate to Clause 66, which defines an authorised officer. It would be a fair assessment of the position of the noble Baroness, Lady Finn, that she does not trust that, in her words, “junior civil servants to use these powers appropriately”. I will reassure her and the Committee that, first, it is not seniority that is key; it is professionalism and experience. The PSFA has already committed to training its authorised officers, who will utilise powers as set out in Clause 66, and authorised investigators, who will use the PACE powers in Clause 7, to predefined standards as set out by the government counterfraud profession investigator standard guidelines. This will align the PSFA with those using similar powers in other government departments such as HMRC and the DWP.

The team at the PSFA are serious people. Current members of the PSFA’s enforcement unit include former police officers and civil servants who have worked in investigatory roles across a number of government departments. They have experience of conducting counterfraud investigations and bring with them a wealth of relevant experience, skills and knowledge. I was tempted to get all their CVs to read out, but I thought that that may prolong Committee a little.

First, the powers in Clause 7 can be used only by authorised investigators specifically authorised to use the PACE powers and not authorised officers. The amendment requiring that those powers can be exercised only as provided in Clause 66 would render Clause 7 unusable.

Secondly, although the Minister will delegate the operation of these powers to authorised officers, the Minister will retain accountability and strong oversight. There will, of course, be strong ministerial interest in the effective, safe and value-for-money use of these powers. Noble Lords will know that I cannot speak for all future Ministers, but the current Minister meets individually with the chief executive of the PSFA very regularly.

Thirdly, the proposed delegation of powers in this Bill to authorise officers follows precedent elsewhere, including in HMRC and the DWP.

Fourthly, the amendment also calls for records of decision-making. In criminal investigations, the PSFA is already bound by legal obligations to record decisions and will do so through a dedicated case management system and the internal review process. The PSFA will have similar processes for civil cases.

Finally, the powers in the Bill are subject to review by an independent person as specified under Clause 64, and will be subject to inspections by His Majesty’s Inspectorate of Constabulary and Fire & Rescue Services. Inspection reports will be publicly available and those by the independent person will be laid before Parliament.

I think it would be helpful if I gave some additional clarity on some issues raised by noble Lords. The Civil Service grade that an authorised officer would be required to hold has been a theme of some debate in your Lordships’ Committee, so I think some clarity will be helpful. The Bill does not stipulate a grade that an authorised officer needs to hold. The grade is less critical than the training they undertake. However, the PSFA anticipates that, in practice, all authorised officers will be of at least HEO grade. This is comparable to other organisations such as HMRC and the DWP. Clause 66 does, however, stipulate that a review must be conducted by an authorised officer at least one grade senior to the officer involved in the initial decision.

--- Later in debate ---

Public money deserves high standards. We cannot afford to rely on voluntary best practice, opaque data and after-the-fact enforcement. The scale of the challenge, which this House has debated throughout the passage of the Bill, requires us to be proactive, not reactive. Amendment 68D offers a coherent and proportionate framework that would elevate fraud risk management across the public sector and equip both Parliament and the public with the information needed to track progress. I urge the Minister to consider it not as an imposition but as a strategic asset in helping us to achieve the outcome we all desire. I beg to move.

[Lord Palmer of Childs Hill (LD)]

My Lords, I warmly welcome Amendment 68D, which proposes a comprehensive and rigorous approach to fraud risk management for public authorities overseeing significant spending schemes. The amendment reflects a proactive commitment to safeguarding public funds by requiring authorities managing more than £100 million annually to register their schemes, conduct thorough fraud risk assessments and use robust methods to measure and report fraud. Such measures are vital to identifying vulnerabilities early and taking meaningful action to prevent loss, which aligns closely with my party’s values of transparency—which I keep coming back to—and responsible stewardship of public money.

Moreover, the role assigned to the Public Sector Fraud Authority in verifying fraud rates, publishing comparisons and enforcing corrective actions would introduce a much-needed layer of independent oversight and accountability. The requirement for independent audit and parliamentary scrutiny would further strengthen this framework in ensuring that these responsibilities are not only carried out diligently but openly reported and reviewed. The amendment offers a significant opportunity to improve fraud prevention at scale, protect taxpayers and build public trust in how government spending is managed.

I fully support this proposed step forward. I relate this to my time on Barnet London Borough Council, when I chaired the audit committee. The idea that audit can make things work better and that scrutiny and bringing things into the open will form better department management as well as better control of finances was the premise of the world I lived in when I chaired the committee for eight years. I therefore support the amendment proposed by the noble Baroness, Lady Finn.

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

My Lords, tackling public sector fraud is a foremost priority for this Government. Amendment 68D raises interesting points. It seeks to put some of the work that the PSFA does with departments and public bodies to improve their management of fraud on a statutory basis, and to explicitly have it cover all government schemes or programmes over £100 million.

While we have been debating the fraud investigation activities of the Public Sector Fraud Authority, for which we believe there is a very strong case, we have understandably not given as much time to the wider responsibilities the PSFA already holds, as detailed in its published mandate—which is wonderful bedtime reading, as per my theme; I like to give bedtime reading on each day in Committee. This is not part of the Bill, but it might be useful for noble Lords if I spend a moment to update the Committee on the other work of the PSFA.

The PSFA works with departments to improve their understanding of fraud and to improve their action on the risk of fraud through a range of modern techniques. Fraud investigation is, of course, only one part of this. Alongside this, public bodies need effective capabilities to understand and reduce the risk of fraud, through tools such as fraud risk assessment and fraud measurement, which this proposed amendment covers, and also through intelligence, fraud prevention, deterrence, process design, the use of data and analytics, fraud detection and the shaping of an organisation’s culture.

I would like to set out some key principles around how the Government approach fraud risk. Accounting officers within departments are responsible for managing public sector organisations’ risks, including fraud. Each organisation faces a range of fraud risks specific to its business, from internal and external sources. Managing Public Money—also a fascinating read—already sets out that, for any new major area of spend with high fraud risk, departments shall assess the risk of and impact from fraud at the outset. This identifies the potential for fraud and the different impacts that fraud could have for the spend area.

In high-risk areas, once spending is approved, this results in the development and continued maintenance of a detailed fraud risk assessment. High-risk areas would be the highest areas of government spending where fraud measurements are not yet in place and which have been identified as high risk by a mandatory initial fraud risk assessment process. The PSFA was introduced with a published mandate that openly sets out how it will work with departments and public bodies and what is expected of all parties. Government departments and public bodies must comply with this mandate. The mandate sets out that public bodies must use initial fraud impact assessments, in line with Managing Public Money, submit quarterly data returns on the levels of fraud and error they find and report on their progress against their action plans and key metrics.

Departments and public bodies are also required to ensure that they adhere to the counterfraud functional standard. This is independently assured by the Public Sector Fraud Authority on a rolling basis. The functional standard outlines the expectations for managing counterfraud, bribery and corruption activity. It clarifies the basics that public bodies should have in place, promoting efficient, coherent and consistent management across the public sector. The PSFA’s published mandate enables it to conduct expert reviews on public bodies’ fraud work. To date, the PSFA has reviewed 31 public bodies against the counterfraud functional standard. The PSFA’s mandate also requires it to publish a report on fraud across government annually. This includes the levels of detected fraud and corruption and associated error in departments and public bodies—excluding tax and welfare, as these are published elsewhere. Fraud measurement exercises are used as a tool to understand fraud risk in the highest areas of loss.

The Government have also created a high fraud risk portfolio, in line with the PSFA’s mandate, that details the highest risk areas of government spending where there are not yet fraud measurements in place. The Government decided that schemes on this portfolio should undertake fraud measurement exercises and report these to the centre. This is currently being tested with the current schemes on the portfolio, where it is operating on a “comply or explain” model, enabling us to assess the burden and impact of this approach. The PSFA will continue encouraging and supporting departments to do more targeted measurement. Just last year, the government counterfraud profession launched its first qualification for fraud measurement practitioners.

The amendment also recommends that all the findings are reported to the National Audit Office, in the form of the Comptroller and Auditor General. The PSFA’s mandate already enables the PSFA and the NAO to work very closely to share information on public body performance in dealing with fraud:

“The PSFA will openly and regularly update on its activities and the data it holds to the National Audit Office (NAO). This will include performance data and the compliance with mandatory processes and data requests”.


In addition, this is an area that the Public Accounts Committee has paid keen attention to, and the PSFA has committed to share the high fraud risk portfolio with the committee on reading-room terms.

I hope that the collective measures I have outlined reassure noble Lords that the Amendment 68D would serve only to replicate responsibilities and duties that already exist and that the noble Baroness will therefore withdraw the amendment.

--- Later in debate ---

[Lord Davies of Brixton (Lab)]

My Lords, my noble friend Lord Sikka very much regrets not being here today, for totally understandable personal reasons.

[Lord Palmer of Childs Hill (LD)]

That matter is not in this group.

[Lord Davies of Brixton (Lab)]

Could the noble Lord wait, please?

As the noble Lord has reminded me, my noble friend’s amendments are in the next group. My noble friend Lord Sikka will not be here and the lead amendment will not be moved; however, the issues raised in those amendments are directly relevant to this group. In order for us obtain further clarification, it would be helpful to the Committee if my noble friend the Minister could, in our discussion on this group, give a broad indication of the response that would have been made to the following group so that those Members who are interested can consider what has been said and take a view on whether the specific issues that would be raised in the next group, but are germane to this group, should be raised on Report. I think that it would be helpful to have the matter that would be raised in the following group clarified in answer to this group because, to be honest, they totally overlap.

--- Later in debate ---

Following on from what the noble Baroness, Lady Finn, said on Amendments 74C and 74D, I have a genuine question for clarification about the Minister delegating functions. I hope that the Minister will be able to confirm that the Government will ensure that none of these functions will ever be delegated to an outside agency. I am thinking of the issues of consultants and outsourcing that have brought so much government action into disrepute, and the companies that have had real issues in terms of the way they have behaved in delivering public contracts. We know that a handful of companies deliver most of the large government contracts. I hope that the Minister will confirm that this will never be outsourced, because that would be deeply problematic. Perhaps the amendment tabled by the noble Baroness, Lady Finn, would address that issue.

[Lord Palmer of Childs Hill (LD)]

My Lords, I am pleased to support these amendments, which, once again, seek to enhance the independence, transparency and accountability of the Public Sector Fraud Authority. By probing the Government’s openness to specifying that both the chair and the non-executive members of the authority should be independent—whatever that means—Amendments 68E and 68F reinforce my party’s commitment to ensuring that public bodies operate free from undue political influence. Independence at these levels is crucial for maintaining public trust and guaranteeing impartial oversight of fraud prevention and recovery efforts.

Furthermore, Amendments 69A and 71A, which seek to clarify and limit ministerial powers around appointments and eligibility criteria, would strengthen the governance framework of the authority, promoting fairness and transparency in its leadership. The requirements in Amendments 74A and 74B for timely publication of annual reports and controls on authorising authentication would help to ensure openness and proper organisational integrity.

Finally, Amendments 74C and 74D would confirm that the Minister retains responsibility for functions even when extended to the authority, which would balance operational independence with necessary political accountability. Collectively, these amendments embody my party’s values of good governance and robust oversight, which are essential to protecting public funds and enhancing the effectiveness of fraud prevention. I heartily support these amendments as part of the transparency to which we are committed.

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

My Lords, I thank noble Lords for raising the important issues of independence, recruitment, reporting and powers should the PSFA become a statutory body. The purpose of creating a statutory body is to place individual enforcement decisions at arm’s length from Ministers, but we have been clear that, while the PSFA enforcement unit is small, creating a new statutory body is not proportionate, so the Government will not commence Schedule 2 in the immediate future.

The approach in Schedule 2 adheres to published guidance in the Public Bodies Handbook. It follows the same approach used elsewhere, such as Schedule 1 to the Victims and Prisoners Act, which established the Infected Blood Compensation Authority. Amendments 68E and 68F seek to insert “independent” before the description of the chair and non-executive directors. These are ministerial appointments, but I remind your Lordships that the Government have been clear that, should the PSFA be established as a statutory body, its enforcement decisions would be fully independent of the Minister. To ensure this, the chair and non-executives will be public appointments and will follow the Cabinet Office Governance Code on Public Appointments, which is overseen by the Commissioner for Public Appointments. This will ensure that their recruitment is transparent and includes an independent member on the recruitment panel. This is similar in approach to the Infected Blood Compensation Authority, which uses the same legislative language. Amendment 69B seeks to insert words to a similar effect in respect of the chair appointing the chief executive and executive board members, so it is linked to these amendments.

In respect of Amendments 71A and 74B, which seek to remove the Minister’s power to make regulations on the eligibility rules for members of the PSFA and to prevent the PSFA from authorising a person who is not a board member of the authority authenticating its seal, it is important to note these are common provisions in the creation of public bodies. The seal is the means by which the PSFA will be able to enter into deeds and contracts, such as leasing property, and authenticating the seal just means signing next to it to show that the deed has been approved. Although authentication would usually be done by a board member of the PSFA, we have built in a degree of flexibility so that it can be delegated, for instance to its legal officers, should the need arise. As noted, the Infected Blood Compensation Authority and other public bodies such as the independent monitoring authority, established in the European Union (Withdrawal Agreement) Act 2020, have similar provisions. They serve to improve the efficacy and administrative efficiency of such public bodies.

As to Amendments 74C and 74D, which would see the Minister retain responsibility for the exercise of functions in the Act after they have been extended to the PSFA, and Amendment 69A, which would make the chief executive and other executive members’ ministerial appointments, I refer your Lordships to my earlier point. One essential reason in setting up the PSFA as a statutory body would be to remove any perception of potential political interference. These amendments would be counter to that policy intention.

Finally, Amendment 74A would require the PSFA to publish its annual report within three months of the end of the financial year. The Bill currently stipulates, in paragraph 12 of Schedule 2, that this should be as soon as reasonably practicable after the end of each financial year. That is for good reason. The accounts will need to be reviewed by the Comptroller and Auditor-General, whom we would then need to commit to this timeline. Additionally, Erskine May, our own guidance on reporting, notes that accounts, together with an NAO report, must be laid no later than the following January. A statutory PSFA would follow Erskine May, as well as His Majesty’s Treasury’s guidance on Managing Public Money and the annual Government Financial Reporting Manual, to ensure that its report follows best practice.

I turn to the specifics of the points that have been touched on. The noble Baroness, Lady Finn, asked why eligibility regulations under paragraph 6(1) of Section 2 are useful. The ability for a Minister to lay eligibility regulations in respect of a board’s membership is a common feature in setting up public bodies. They can be used, for example, to safeguard independence, ensure expertise at its inception, or improve public trust by excluding certain individuals or demanding certain attributes. Examples might include barriers against those who are currently politically active, or have conflicts of interest or criminal convictions.

With regard to powers being exercised on a Minister’s behalf and safeguarding, there are numerous safeguards built into the Bill, such as independent oversight of all the provisions by external bodies. There are also obligations to obtain the permission of the courts for debt recovery and rights of appeal to the First-tier Tribunal. Furthermore, authorised officers will be civil servants, obliged to follow the Civil Service Code, which requires that they act solely according to the merits of the case.

In response to my noble friend Lord Davies, I am more than happy, especially given the circumstances with our noble friend Lord Sikka, to write to him with all the points of the speech I would have responded with, and I am happy to share that with all Members of the Committee—that pertains to group 9.

I take the opportunity to reassure the noble Baroness, Lady Bennett. Will any roles be outsourced? No—we are clear that they have to be authorised officers as defined in Clause 66: they have to be civil servants.

I hope that, with those reassurances, noble Lords will not press their amendments and we can move forward to the next group.