Public Authorities (Fraud, Error and Recovery) Bill

Lord Palmer of Childs Hill Excerpts

Report stage
Wednesday 15th October 2025 Lords Chamber

[Lord Palmer of Childs Hill (LD)]

My Lords, our principle generally is that the lowest level of government should make those decisions. To put it up to central government would be overloading central government. It would be like “Yes Minister” with a row of civil servants—bless them—dealing with something that has been sent up from the local authority or public body which did not need to be sent up. Although I have sympathy with what the amendments are trying to do, the idea of loading central government with issues that can be dealt with responsibly at a lower level seems to be against what we are trying to do in this House. So, respectfully, we will not be supporting these two amendments.

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

My Lords, fraud against the public sector takes money away from vital public services, enriches those who seek to attack the Government and damages the integrity of the state. This Bill is part of the Government’s response to this urgent and challenging problem. The Bill gives functions and powers to the Minister for the Cabinet Office, which will be exercised by authorised officers and investigators based in the Public Sector Fraud Authority.

I hope it will assist your Lordships’ House if I remind noble Lords of the PSFA’s mission. The PSFA is the UK Government’s centre of expertise for the management of fraud and associated error against the public sector. It leads the Government’s counterfraud function, which brings together the approximately 16,000 people who work in government departments and public bodies to fight fraud. The standards and guidance that the function creates, led by the PSFA, must be used in central government and can be used more widely in the public sector and beyond to improve the robustness of how we understand, prevent and respond to fraud.

These two amendments would make significant changes to the Government’s intention in bringing forward this Bill on how the PSFA works. They would change the impact of the Bill and are unnecessary to be put into law, so we cannot accept them.

On Amendment 2, the noble Baroness, Lady Finn, offered a version of this amendment in Grand Committee that simply deleted line 10, which I resisted because removing that line without putting something else in its place would have created uncertainty and potentially conflicted with the preservation of public authorities’ own fraud functions in Clause 2(5). It is clear this draft has been influenced by the debate on the original, and I thank the noble Baroness for it; however, the new version goes further and dramatically changes the impact of the Bill.

Amendment 2 would create an extensive new power for the Minister for the Cabinet Office and change the relationship between the PSFA and the public authorities it works with. The Government’s intention is that the PSFA offers a public sector fraud service, collaborating with public authorities which have been attacked by fraudsters to take action to investigate, enforce and recover the funds. Collaboration is vital in the Government’s fight against fraud. Noble Lords will be aware that last month the Government announced that, in the previous 12 months since April 2024, over £480 million was prevented from going into fraudsters’ pockets. Driving this kind of cross-government collaboration is what the PSFA is for. We can do more, which is why we need the Bill, but the PSFA is already working.

I firmly believe that the normal mechanisms of government can ensure that counterfraud co-operation happens, as it is already happening in the work of the current pilot unit in PSFA. In issues of national importance, there will also be some moral and public pressure for something to be done, so I believe it is not necessary for the Minister to have a directive power in law to investigate on their own initiative. We truly believe that the collaborative approach outlined in the Bill combined with the normal operations of government will ensure the PSFA has the access it needs.

The definition of public authority in Clause 71 is broad and this amendment would affect different public authorities differently. For central government departments, it would mean that a Minister below Secretary of State level could direct and override Secretaries of State. For local authorities, the amendment would mean a new power for central government to take over a responsibility without their consent. The Local Government Act 1999 already has powers to this effect, and we do not want to create a new one specifically for fraud.

Amendment 19 would require departments to conduct an internal review if, following a PSFA investigation, it is confirmed that they have lost more than £50,000 to overpayment or fraud. All losses on this scale should already be investigated and reported on. There are established audit, assurance and reporting processes for this. In addition, the facts of this case would already have been established by the PSFA, and learning taken from it would be shared across government to aid the prevention of fraud. This amendment would create an extra burden on the department and replicate the work of the PSFA. It is unnecessary, as its core aim will be addressed through other activities. Therefore, after my very persuasive arguments, I encourage the noble Baroness, Lady Finn, to withdraw her amendments.

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[Baroness Fox of Buckley (Non-Afl)]

My Lords, throughout Committee, concerns were raised about the amount of information-gathering power the state will have, particularly the relationship between banks and the information that could be gained. I cannot emphasise enough the plea that these amendments make, particularly Amendment 3: that it is important when such power is being accrued that we do not forget very important principles such as “innocent until proven guilty”.

There is no doubt that if you have information that suggests that somebody could be guilty of fraud, that does not make them guilty. Unless there is a constant reminder that they are being investigated or information is being gathered, they will potentially be subject not only to stigmatised attitudes but to debanking measures and discriminatory actions, as we have just heard.

I really hope the Minister can reassure us that we are not going to be glib about the impact of the powers the Bill accrues to the state, which could destroy innocent people’s lives. That might not be the Government’s intention, but it could be an unintended consequence. Therefore, this amendment is very important, and we need guidance or reassurance, or to hear the ways in which this could be dealt with.

[Lord Palmer of Childs Hill (LD)]

My Lords, we are in a world of information-sharing and information-gathering, and this is where that starts and stops. Amendment 3 would ensure that

“information notices issued to banks and financial institutions include a clear statement that the person to whom the information relates is not necessarily guilty of suspected fraud”.

Amendment 4

“would limit the persons to whom information may be disclosed by requiring the Secretary of State to specify eligible persons in regulations”.

In our view, these are sensible safeguards and regulations. On that basis, we on these Benches broadly support the amendments.

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

My Lords, I appreciate the noble Baroness, Lady Finn, bringing forward these amendments again. I find myself agreeing with the concerns outlined by the noble Baroness and other Members of your Lordships’ House. I reassure all noble Lords that we are already undertaking this work, and that the safeguards are in place.

On Amendment 3 and the issue raised by the noble Baroness, Lady Fox, we will be including specific information in guidance for authorised officers to ensure that information notices advise the information-holder that the investigation is ongoing, and no inference should be drawn that the individual specified on the notice is guilty. This amendment is therefore not required as it is already our intention to do this, and it will be achieved in guidance.

Turning to Amendment 4, I again assure the noble Baroness, Lady Finn, and other Members of your Lordships’ House that I agree with the intention of the amendment, which is why there are already safeguards in the Bill that restrict the disclosure of information. Clause 5 details that:

“Information can only be disclosed for the purpose of exercising the core functions”.


This restricts to whom and for what purpose the information can be disclosed. However, also including a prescriptive list of persons who can have information disclosed to them would further restrict the intent of the clause and the effectiveness of its scope in exercising the core functions detailed in Clause 1 of the Bill.

I hope to further reassure noble Lords that the PSFA’s enforcement unit would also have memoranda of understanding for each person it would be sharing information with, as well as maintaining a data protection impact assessment to ensure that this information is shared and held in adherence to data protection legislation. We have taken every step to ensure that there are appropriate safeguards in the disclosure of information, while balancing this with making the powers relevant and effective for an investigation. I hope that this reassures noble Lords and that the noble Baroness will withdraw her amendment.

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[Baroness Fox of Buckley (Non-Afl)]

My Lords, after Committee this was one area of the Bill that I literally had nightmares about. I think a really dangerous precedent is being set here. I am rather disappointed that the noble Baroness, Lady Finn, will not divide the House on this, because this is one area where inadvertently handing over police powers to civil servants could completely backfire and cause real, serious problems.

I was talking recently to a group of people about some of the problems within the police force. Even though we have vetting and training, there are serious and well-documented problems of corruption, in some instances, or misbehaviour—I hardly need rehearse them. These police officers are charged with enormous privilege to act on behalf of the state. Therefore, we know that even when we have such safeguards in place, people with power can abuse that power.

In this instance, this Bill, however well meaning, intends to give similar powers to people when we have no idea what their training will be, whether they will be vetted and what qualifications there will be. Therefore, this amendment is entirely appropriate. It is rather modest, but it does at least seek to provide some safeguards for what is happening here, which is that the state is setting up a civilian population to act as police officers. To be honest, the public do not know about it. It is shocking. Whenever I have told anyone that this came out in Committee and that it is contained in the Bill, it is the thing that has shocked people the most. I hope not just that we can receive reassurances but that concrete responses are brought forward by the Minister as to what can be done to ensure that this does not go very badly wrong and backfire.

[Lord Palmer of Childs Hill (LD)]

My Lords, clearly, it would be best if something such as who these investigators are was in the Bill so that we have more detail. What we are being offered by these amendments is to require the Minister to outline in statutory guidance the process for appointing authorised investigators. This is by no means as good as having it in the Bill, but I believe that statutory guidance has to be carefully considered, because who is appointed to investigate should be decided not just with a flick of a pen but with more careful consideration. We on these Benches are broadly supportive of this amendment, because we believe it would add additional transparency to the appointment process.

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

My Lords, it is essential that any individual authorised to use the powers enshrined in the Police and Criminal Evidence Act 1984 is competent to discharge their duties under the law. We are committed to ensuring that this is the case for the authorised investigators created by the Bill. However, for legislation to require the publication of guidance on an internal appointment process is not only unnecessary but inconsistent with established practice in this area across other government departments. Government departments with similar investigative powers—for example, HMRC, the Home Office, Defra and even the Food Standards Agency—are not required to and do not publish statutory guidance on this point.

Let me reassure your Lordships’ House that Ministers take their responsibilities seriously. It is for this reason, as we have consistently affirmed, that no investigator will be authorised to exercise these powers until the Minister is entirely satisfied that they possess the requisite training and expertise. This training will cover: proficiency in relevant aspects of PACE, particularly the legal framework and applications of Section 8 and Section 9, and PACE codes of practice as far as they apply to the PSFA’s powers; proper procedures for applying for and lawfully executing warrants, including entry, search, seizure and handling digital information; and proper handling and retention of and access to evidence. Crucially, they will be trained in safeguards for individual rights during investigations and warrant execution, and in the proper handling and retention of and access to evidence.

Training will be provided by the College of Policing by means of a series of bespoke training courses, the first of which has commenced this week. Individuals will be required to demonstrate proficiency in all relevant facets of PACE before the Minister will authorise them as authorised investigators, with particular emphasis on the legal framework alongside its accompanying codes of practice. These authorised investigators will be members of the government counterfraud profession, and they will be required to meet the appropriate professional standards.

Therefore, I urge noble Lords to consider that the existing framework, bolstered by our commitment to rigorous training, already provides necessary assurances and that an amendment to codify this is unnecessary. I reassure and remind noble Lords that these powers cannot be exercised in any specific case unless a court has granted a warrant—the ultimate safeguard. I hope that this explanation reassures noble Lords and that the noble Baroness will therefore withdraw her amendment.

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[Lord Vaux of Harrowden (CB)]

My Lords, I am generally supportive of all the amendments in this group, but particularly Amendments 17 and 22. This Bill, and particularly this part of it, impose a range of onerous obligations on the banks and other financial institutions that are affected by it and that have to respond to information notices and so on. But nowhere does the Bill provide for how the costs that arise from those obligations should be dealt with, or for how to ensure that they are proportionate.

Amendments 17 and 22 simply add an important level of review and transparency, which would allow us to ensure that the costs being imposed on those institutions are reasonable and proportionate. The very fact of the requirement to prepare impact assessments and to review the costs of compliance should of itself ensure that these costs are kept at the forefront of the Government’s mind when using these powers. I therefore hope that the noble Baroness will accept Amendments 17 and 22.

On Amendment 26, I absolutely support the concept. I am just slightly confused as to whether it is not already covered by Clause 65, but I support the principle.

[Lord Palmer of Childs Hill (LD)]

My Lords, there are five of these amendments. Amendment 16

“would ensure that the outcome of consultations required by section 38(6) is laid before Parliament prior to the implementation of regulations”.

Amendment 17 is a proposed new clause, which

“would ensure that changes to the means through which deduction orders are processed are accompanied by an impact assessment”.

Amendment 22, which has received some support, would require the Minister to undertake yet another review:

“of the costs banks are having imposed upon them by Part 1 within 12 months of the new section coming into effect”.

Amendment 26 proposes another new clause, requiring the Minister

“to publish an annual report on the use of powers conferred by Part 1 of the Bill, which must then be laid before Parliament”.

Finally, Amendment 112 is a proposed new clause that

“would require the Minister to publish an annual report on the estimated scale of fraud against public authorities”,

which must again be laid before Parliament.

This would be a pretty hefty tome of things to be laid before Parliament: a book all by itself. Whereas these Benches welcome measures that increase clarity and accountability, is it necessary to prescribe additional reporting mechanisms beyond those already established? Our focus has been on ensuring that existing processes are effectively implemented. I do not think they always are, but that is what has to be done. They also have to be accessible, rather than imposing formal obligations that may not meaningfully enhance anything. I understand the thrust of these amendments, but they would produce a tome of regulations—with a line of civil servants to deal with that—yet provide no meaningful improvement.

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[Lord Palmer of Childs Hill (LD)]

My Lords, I found it difficult to believe that this was being required of us today. Amendment 21 requires each public authority’s reported fraud rates annually, employing a rigorous audit and sampling comparably statistically robust methods. That assumes that public authorities are not running any systems whatever themselves. The whole principle of government is that you do not do everything centrally, from central government, but you pass some things down to the individual public authorities.

For many years, I served as the chairman of the audit committee on the London Borough of Barnet, where we rigorously looked at spending proposals, as I imagine do all public authorities. The amendment says that the public authority must

“register each relevant spending scheme or programme … before the start of each financial year”.

It is meant to be for those exceeding £100 million annually, but for most schemes from public authorities—think of the new railways, for example—the figures never stack up by the time you get to the end of the programme. If it is expected that they will have to identify them at the beginning of the programme, numerous exceptions will be found to those programmes.

This amendment does not hold water. It takes away from all the public authorities the authority and vigilance that they are meant to assume themselves. We cannot support this amendment.