Public Authorities (Fraud, Error and Recovery) Bill

Lord Verdirame Excerpts

Committee stage
Wednesday 25th June 2025 Grand Committee

[Baroness Lister of Burtersett (Lab)]

My Lords, Amendment 123 is supported by the noble Baroness, Lady Bennett of Manor Castle, who is in the Chamber, and the right reverend Prelate the Bishop of Leicester, who regrets that he cannot be in his place. He was going to be replaced by the right reverend Prelate the Bishop of Manchester but he is also in the Chamber. I thank them anyway for their moral support, even if it cannot be practical. I also thank the Public Law Project for all its help with the amendment. I apologise that I was unable to attend Second Reading, but my noble friend Lord Davies of Brixton kindly gave notice of this amendment.

The amendment brings the test of recovery of universal credit overpayments caused by official error into line with the housing benefit provisions by ensuring that recovery can be made only where the claimant could reasonably have been expected to realise there was an overpayment. There is surely no better time to address official error overpayments in a Bill so appropriately named the “Fraud, Error and Recovery” Bill. However, it is currently one sided. Although it recognises the harms that both fraud and error cause in the social security system, it focuses only on the behaviour of claimants. It does not address the harms that result from the recovery of so-called official error overpayments. These are debts created because of mistakes made by the Department for Work and Pensions.

Unlike many other benefits, DWP can recover official error UC overpayments from claimants. This power was introduced in the Welfare Reform Act 2012 and represented a significant change to the position previously applied to most legacy benefits—that is, those that preceded UC. According to DWP data, in 2023-2024, 686,756 new UC official error overpayment debts were entered on DWP’s debt manager system. Is my noble friend the Minister able to give us any data on the circumstances in which official error overpayments occur and the average length of time before they are identified?

We are not just talking about numbers on a debt manager system. These DWP mistakes are having a serious impact on the lives of individuals such as D, who got in touch with me after hearing my noble friend Lord Davies raise the issue at Second Reading. D emailed me and we had a phone conversation. She told me that after her son was born, she was incorrectly told by DWP that she would be able to claim UC while her partner was studying for a master’s degree. Two years later, the DWP then told her that she was not eligible and that she now owed them £12,000—a “life-changing amount”, in her words. She has tried to dispute this through the tribunal system and the DWP complaints process. But even though the judge in the tribunal was sympathetic, the response has been that the DWP has the power to recover all overpayments, regardless of how they are caused. D now has £20 deducted from each UC payment she receives but no record from the DWP of how much she still owes.

It simply should not be the case that claimants such as D are paying the price for DWP mistakes. Public Law Project research demonstrates that the financial and psychological impact of overpayment debt recovery on individual claimants can be severe and is often associated with a particular sense of injustice. Understandably so, with individuals finding themselves unexpectedly in debt through no fault of their own.

The DWP’s default approach is to recover all overpayments regardless of how they are caused. The onus is on claimants to request discretionary measures, such as a waiver, but the DWP does not automatically tell them this. In 2023-24, only 75 waiver requests were granted; this equates to only 0.01% of overpayment debts registered that year. Could my noble friend tell the Committee what steps, if any, the DWP is taking to make waivers more accessible? In particular, would it consider following the example of the Department for Communities in Northern Ireland and automatically including reference to waivers in communications with claimants? Will it consider lowering the thresholds and evidential requirements to grant waivers?

In the Commons, the Minister referred to measures that were in place to mitigate the risk of harm associated with overpayment recovery. I welcome the introduction of the fair repayment rate, which I am sure my noble friend will mention. However, access to some of these safeguards is not an easy process for claimants to navigate. Moreover, as evidenced by research from the Public Law Project, Citizens Advice, the Trussell Trust and StepChange, and acknowledged by the DWP’s own guidance, those safeguards are not sufficient to prevent harm and hardship.

This was illustrated by a recent report from Policy in Practice about deductions from UC in general. It observed that many low-income households are already in crisis and at risk of deep poverty, prior to the application of deductions. I know that I do not have to explain to my noble friend the difficulties of trying to survive on universal credit and how low it is. That will still be the case despite the welcome, real-terms increase being proposed in the legislation currently before the Commons. Policy in Practice found that deductions risk placing households further from being able to afford the essential items of daily life. This is particularly the case for lone parents and carers.

Citizens Advice reports that fewer than 40% of its clients who contacted the DWP were successful in getting an affordability measure put in place, yet the DWP’s own guidance recognises that any recovery of an overpayment from any person in receipt of benefit is almost certain to cause some hardship and upset for them and their family. What criteria does the DWP use to decide what is an affordable deduction? Would the DWP consider agreeing an affordable and sustainable repayment plan with claimants before initiating recovery by way of deductions?

As I said, overpayment recovery is taking the individual below the amount that the DWP has assessed them to need, in a context where UC rates have already been shown to be insufficient to meet essential needs—a point emphasised by Policy in Practice. This is why I have tabled an amendment to bring the test for recovery of UC overpayments into line with the current test for housing benefit. It would ensure that UC overpayments caused by official error could be recovered only when individuals could reasonably have been expected to have realised that they had been overpaid. It places the onus on DWP officials to consider the fairness of recovery before initiating it. When UC was introduced, the then Labour shadow Minister for Employment considered this a just and fair test, which has been tested in case law.

This amendment would also create a clear incentive for the DWP to prevent these mistakes in the first place, which is a step towards a better-functioning social security system that gets things right first time. We ought to pay attention to the more than 30 charities that have written to the Secretary of State urging the Government to grasp this opportunity.

In introducing the Bill’s Second Reading, my noble friend stated:

“Our approach is tough but fair … fair on claimants, by spotting and stopping errors earlier and helping people to avoid getting into debt. It is fair on those who play by the rules”.—[Official Report, 15/5/25; col. 2346.]


But the current system is patently unfair to those who have been affected by an official error that they could not be expected to spot, and who have played by the rules as they understood them.

This is a fundamental question of fairness and of rights and responsibilities. If a government system makes mistakes, who should bear the consequences? Is it the system that caused the error and has the power to avoid it, or the service user who has no control over, or responsibility for, that mistake and, worse, is detrimentally affected by it? If we are serious about addressing fraud, error and the recovery of debt in the Bill, it would—for want of a better word—be an error on our part not to take action to end this unfair practice and source of economic instability for hundreds of thousands of families and individuals whom our social security system is there to serve. I beg to move.

[Lord Verdirame (Non-Afl)]

My Lords, I will speak in support of the amendment because it raises, as the noble Baroness, Lady Lister, pointed out, a question of principle. Should a person who received payments in error always be required to make restitution in full?

We are dealing with the application of this principle in the context of welfare payments, but it may be useful to keep in mind how this principle would apply in other contexts under our law. The default position is, as one would expect, that a party that has received money in error is obliged to return that money. However, it is also the case that our law has developed an important exception to this general position. This is known as the change of position defence, which was first recognised by Lord Goff in the case Lipkin Gorman v Karpnale Ltd 1991, where he said that

“the defence is available to a person whose position is so changed that it would be inequitable in all the circumstances to require him to make restitution, or alternatively, to make restitution in full”.

In essence, where the person has changed their position, in good faith, in reliance on that payment—for example, by spending it—restitution in a non-welfare context may be denied in whole or in part.

As I said, it is an equitable exception that our law has developed over a number of decades and on the basis of various decisions. It is a complex area of law known as unjust enrichment, on which many doctoral theses have been written. The reason it has attracted so much attention is that there is a conflict of fairness. On the one hand, it seems right that the payer who paid in error should, in principle, receive the money back and that people should not derive benefit from someone else’s innocent error. On the other, it also seems wrong that someone who made no error and relied, in good faith, on that payment should be unduly penalised. The common law and equity seek to strike a balance between these two concerns with the change of position exception that I have outlined.

For welfare payments, we are dealing with a context where statute rather than common law applies; however, it seems that the concerns that the common law has sought to address in other contexts arise even more acutely. The people who received the payments are socioeconomically disadvantaged and very likely to have spent that money, as the case mentioned by the noble Baroness illustrates. Thus, they are very likely to have changed, in good faith, their position by relying on those payments. To ask them to return that money is particularly burdensome on individuals who are on benefits and without a safety net.

Section 71ZB of the Social Security Administration Act, which the amendment proposes to change, seems a very blunt instrument. It responds to that first concern—to ensure that the payer, in this case the taxpayer, should have their money back—but it does nothing to protect the bona fide recipient of that payment from being penalised unduly. For that reason, it seems a fundamentally unfair provision. It seems wrong that the protection that a bona fide recipient of a payment in error would enjoy in other contexts, including a commercial context, should not apply to the bona fide recipient of a welfare payment made in error. This amendment seeks to remedy that unfairness, and it has my support for that reason.

It is true that Section 71ZB gives the Government a discretion and I suppose it will be said that there is guidance that tells the Government to exercise that discretion, taking into account certain circumstances. But the good will of the payer is not sufficient and that certainly is not the position under the general common law on restitution. It is not just a matter of the payer having the good will not to pursue the recovery of the payment; there has to be more to recognise that the innocent beneficiary, too, has an entitlement to protection. It seems to me that this amendment seeks to provide that correction to Section 71ZB of the Social Security Administration Act 1992.

I will, of course, be interested to hear what the Minister has to say about the various mitigations that might exist, but at the moment I agree that, unless the mitigation is in statute, whatever guidance might be in place will not be sufficient. I would also like to take this opportunity to thank the Minister and her officials for the very informative briefing last week.

--- Later in debate ---

[Lord Palmer of Childs Hill (LD)]

My Lords, Amendments 125A and 129A relate to the prevention of fraud against public authorities, specifically by seeking to make it an explicit offence to facilitate fraud through the dissemination of relevant information online. I welcome these amendments because they deal with deliberate fraud, rather than chasing carers for errors. That is a difference that I would like to accentuate.

The Bill is designed to safeguard public money by reducing public sector fraud, error and debt, introducing new powers for the Public Sector Fraud Authority and enhancing the DWP’s ability to tackle fraud in the social security system. Amendment 125A seeks to strengthen this framework by targeting those who enable fraud through online channels, reflecting the reality that much fraudulent activity today is co-ordinated or facilitated via the internet. By explicitly criminalising the dissemination of information intended to assist fraud, the amendment aims to deter would-be facilitators and close a loophole that modern fraudsters increasingly exploit.

It is important, however, that such measures are balanced with appropriate safeguards to ensure that legitimate online activity is not inadvertently criminalised and that enforcement is both proportionate and effective. The Bill already provides for oversight, reporting mechanisms and independent review to ensure that the new powers are used appropriately. As we consider these amendments, we must ensure that our legislative response to online facilitation of fraud is robust enough to protect public funds while also safeguarding civil liberties and maintaining public confidence in the fairness of our legal system. In this way, I hope that the Bill and its amendments can deliver the Government’s commitment, which I believe they have, to tackle fraud without overreaching or undermining the rights of individuals and organisations operating lawfully online.

This is an important part of our discussions today because we are talking about deliberate fraud in the modern world, including online fraud, and we have had indications of personal situations from other speakers. This is about how things are moving in the digital age. These amendments are an important part of trying to tackle that, and I support them.

[Lord Verdirame (Non-Afl)]

My Lords, I was not planning to speak, but I thought I would say a couple of words. This is an important amendment and I support the objective that it is pursuing, although I also agree with the comments by the noble Baroness, Lady Fox, on being careful about using criminal law to deal with much bigger cultural and social problems.

However, the amendment needs some tightening in the subjective element, because at the moment it punishes a wide range of conduct. At one end of the spectrum, a person would commit an offence if they ought reasonably to know that

“the information or guidance provided … will likely be used to enable or encourage another person to obtain, or attempt to obtain, benefits through deception”.

There seems to me a rather loose connection between the person who would be committing the offence and the actual fraud; it is a bit too remote. At the other end of the spectrum, a person would commit an offence

“if they know … that the information or guidance provided … is intended to facilitate dishonest conduct under the Social Security Administration Act 1992”.

That does not strike me as a remote connection between the person whose conduct we would be criminalising and the actual dishonest conduct, so there needs to be a bit of tightening of the subjective element, making sure that it is more narrowly focused than it currently is.

[Baroness Sherlock (Lab)]

Again, I thank noble Lords for an interesting discussion—some of it even on the amendment.

The noble Baroness, Lady Fox, is right that sickfluencers are the Opposition’s favourite topic, but it gives us an opportunity to look at this element of fraud and how the Government deal with it. I will try to take us through it. This also gives me a chance to show the way in which our legislative framework provides a comprehensive basis to enable the DWP and the PSFA to address fraudulent activity against the public sector or the social security system.

In responding to the amendments, there is something that we need to acknowledge. The noble Viscount mentioned a broad spectrum and clearly this is, particularly online. The noble Baroness, Lady Fox, made this point on a previous day in Committee: there is a lot of advice online in all kinds of settings on how to claim disability benefits, and it can range from genuine advocates for disabled people to people in similar circumstances trying to tell other people what their experience has been to friends’ or family’s online content through social media. There is all manner of guidance out there, and we need to be very careful not to drag people who are not doing anything wrong into the debate.

While many people provide advice with good intentions, irrespective of how useful the advice is or how effective it will be, there are clearly some unscrupulous people who actively try to encourage or assist others in committing fraud against the social security system. Where activity can reasonably be countered, such as taking down websites or seeking the removal of posts that are unlawful, the DWP takes relevant action. We already collaborate with a range of government partners, including Action Fraud, the City of London Police and the National Cyber Security Centre to prevent fraudulent activity online.

There are legislative duties under the Online Safety Act for social media companies to remove harmful and illegal content, including content that encourages or assists others to commit offences. The Online Safety Act also allows us to work with Ofcom and its new trusted flagger process, and we have trusted escalation routes to report social media content on certain platforms.

We are committed to demonstrating that such behaviour should not be tolerated, and we encourage anyone who identifies material online—I include the noble Viscount, Lord Younger, in this—to report it through the available channels. These people should face consequences, but there is an existing legal framework to do so. Section 7 of the Fraud Act 2006 and Section 44 of the Serious Crime Act 2007 already make it a criminal offence for individuals to provide information on how to commit fraud. That includes influencers sharing and selling information online, such as fraud instruction manuals.

In addition, we are concerned that Amendment 125A could potentially complicate the legislative landscape. Adding a new offence would create overlap with existing legislation that could lead to confusion in prosecution or sentencing, and that is entirely avoidable. It also happens that, ironically, the amendment would actually shorten the maximum sentence for those convicted of the new offence; it would carry a maximum period of five years in custody but, if the noble Baroness, Lady Fox, does not like that, the current maximum is potentially 10 years under existing legislation.

I know that the noble Viscount acknowledged previously that public sector fraud hurts everyone and that he wants to tackle it and support us in doing that. I was surprised, therefore, to read Amendment 129A, which he tabled. The amendment would prevent the use of the powers in the Bill until we publish a review assessing the impacts of people who enable others to deceive a public authority to obtain social security or welfare benefits that they are not entitled to, or to circumvent eligibility checks. I clearly cannot agree that we should prevent the PSFA or the DWP using these important new powers to tackle fraud and error until we have published such a review. During that time, we could be out there investigating fraud, tackling error and recovering public money.

I encourage the noble Viscount to reflect on what he and his Government focused on when they were in power. This focus on people who share information online or through other means may not be the “silver bullet” as he hopes. We will continue to see determined and hostile actors trying to defraud the system. It is absolutely right that the department takes action to tackle fraudulent online content and has a deterrent, but the crucial thing to remember is that fraud itself cannot take place unless those seeking to defraud the welfare system manage to interact with it. That is why we have put so much effort into protecting the social security system directly. This provides the strongest chance of success, evidenced by looking at the significant value of such activity.

I really enjoyed the contribution by the noble Baroness, Lady Fox. There is so much that I would like to push back on but I do not think that I can keep the Committee here for long enough to get into some of the issues. To take a small one, however, she thinks that this Bill is a sledgehammer to crack a nut—I think it is a pretty big nut, and we want to tackle it. We will just have to agree to disagree on that. On her broader points, this Government recognise that there are too many young people who are genuinely struggling with their mental health and who need support. We want to make sure that they get the help that they need. We also recognise that, for many people, good work is good for good health, both physical and mental. We are now in a situation where one in eight of our young people are not in education, employment or training, and we cannot allow that to carry on.

We want to get out there and support people to get into the kind of work that will be good for them, but we want to make sure that those who genuinely cannot work are able to get support. That is the direction of travel for the Government and what our reforms are meant to be about.

The noble Viscount keep asking how many people the DWP prosecutes. As he will remember, the DWP is not a prosecutor itself. The department’s role is to refer cases to the appropriate prosecuting body, the Crown Prosecution Service, which selects the most appropriate offences to prosecute under. In 2023-24, fraud investigation teams in the DWP referred around 700 prosecution cases to the CPS and Crown Procurator Fiscal in Scotland. The department does not use the term “sickfluencer” and we do not have categories for that, so I cannot tell him how many cases fall under that description. We obviously do not comment on individual cases that we refer to the relevant prosecting body.

However, I understand the points that the noble Viscount is making. We are happy to continue to work in this space but, in terms of these amendments, just proposing what is in effect a complication of the landscape and a shorter prison sentence, while preventing the DWP and PSFA from using powers in this Bill to tackle fraud and error, will not deter those criminals; it will simply enable them to keep on going. I therefore urge him to withdraw his amendment.