Mike Wood MP: speeches

Speeches

• 4 Mar 2025 · Public Authorities (Fraud, Error and Recovery) Bill (Fifth sitting) · Hansard source

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  Yes; it is set out quite clearly in amendment 19.

• 4 Mar 2025 · Public Authorities (Fraud, Error and Recovery) Bill (Fifth sitting) · Hansard source

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  Clause 17 establishes that when a payable amount is recoverable, the Minister can issue an order for direct deductions from a liable person’s bank account, either through regular deductions or a lump sum payment, as she said. Clause 18 further clarifies that those deductions can be taken from any account in which the liable person has a beneficial interest. That is extremely important, given the difficulty in establishing the different networks of bank accounts that may be held, particularly in cases of serious and organised fraud. We welcome the flexibility the clause introduces. Although the provisions aim to improve efficiency in recovering public funds, there are still questions regarding fairness, proportionality and the safeguards that are in place, starting with the definition of beneficial interest in clause 18. Clause 18(1) allows the Minister to make an order on an account that is held by the liable person and contains an amount that the Minister considers the liable person has a beneficial interest in. What criteria or evidence does the Minister expect the PSFA to use in determining a person’s beneficial interest in an account, given the complex ownership and title structures that may be in place? On the flip side of that, how will the rights of third parties be protected, particularly if funds belong to someone other than the liable person that might be held in a shared account? That brings us to the question of joint accounts. Clause 20 assumes that a joint account is split equally between account holders unless the Minister has reason to believe otherwise. What types of evidence would be accepted to demonstrate that the liable person’s beneficial interest is different from an equal split? The Minister referred to bank statements, but would those investigating also look at legal documents or perhaps third-party testimony? Would that be appropriate in some circumstances? Will additional checks be carried out to ensure that joint account holders are not unfairly penalised for debts that might not be theirs? It is not uncommon for people in marriages or long-term partnerships to have a domestic joint account. It might well be that one of the partners in the relationship is, in practical terms, paying more into an account, but also using the account more than the other partner, despite the two names being equally on the face of the account. Clause 21, on the notice and the right to respond, sets out the process of notifying banks and liable persons before deductions are made, and includes provision allowing them to make representations within 28 days. The clause allows the Minister to notify the bank first before informing the liable person, to prevent account closure, asset withdrawal or other measures being taken to deprive the taxpayer of the recovery of sums that might rightfully be recoverable. Can the Minister point to a precedent for that approach in other areas of law? How does that align with best practices in financial enforcement? Although clause 21 allows the liable person to make representations to the Minister, there is not an explicit provision for an independent appeal mechanism. Is there a reason why the Bill does not provide for such a process? Would the Government consider an independent review mechanism, beyond the systematic review that is in place for the Bill, to ensure that decisions are fair and transparent and do not disproportionately affect people in individual cases? To go back to the potential risks of financial and domestic abuse that I touched on earlier, deducting money from joint accounts could create serious risks for individuals in financially abusive relationships. What safeguards will be put in place to prevent financial hardship, particularly for vulnerable individuals who might not actually be responsible for the debts that the PSFA seeks to recover? What specialist training will staff receive to identify and mitigate the risk of financial or domestic abuse? The effectiveness of the measures will depend on strong safeguards, clear guidance and robust oversight mechanisms to ensure fairness and proportionality. I would appreciate further clarification from the Minister on those points.

• 4 Mar 2025 · Public Authorities (Fraud, Error and Recovery) Bill (Fifth sitting) · Hansard source

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  Clause 13 sets out that the Minister can use powers to recover amounts from a penalty, such as late payment, but also relevant costs to be awarded by a court or tribunal. Relevant costs rightly also include costs that are reasonably incurred by the Minister in exercising the powers in chapter 4. Can the Minister share details on what this measure might include? What is reasonable and what are the expected amounts that might be recovered in this way? Does this also cover legal costs—for example, court fees and legal representation? Will it include investigatory costs, such as the use of forensic accountants or data analysts? Does it extend to administrative costs, such as the work of civil servants processing cases? How is reasonableness to be determined within these clauses? What criteria or guidelines will be used to assess whether a cost is reasonable and will there be an independent review process to prevent excessive or disproportionate costs from being been claimed? Will the affected individuals or entities have the right to challenge, at an appropriately early stage, costs that they deem to be unreasonable? On the expected scale of the costs, do the Government have an estimate of the average cost that could be incurred and recovered under these provisions, and will there be caps or limits on the amount that can be recovered from an individual or organisation? Does the Minister expect those to vary? How will cost recovery be monitored and reported to ensure transparency? Given the potential financial impact on those subject to enforcement proceedings, it is crucial that clear safeguards, transparency and accountability mechanisms are in place to ensure that costs remain proportionate and fair. I would appreciate further detail from the Minister about how these costs will be defined, managed and reviewed. Clause 14 provides that the Minister can recover an amount due in respect of a penalty only when the time for appealing has passed without an appeal, or any appeal has been finally determined. We think that that is perfectly sensible and will support the clause.

• 4 Mar 2025 · Public Authorities (Fraud, Error and Recovery) Bill (Sixth sitting) · Hansard source

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  Where the individual has not notified anyone of their new employment, does the Minister expect a new employer to have any way of finding out that a new employee is subject to one of these orders? Obviously, there is the question of whether employers are aware. Particularly for small employers, I am not sure that they would necessarily understand the significance of an oblique reference to one of these deduction orders. People are obviously familiar with child maintenance deductions but less so with one of these cases. How can that be addressed?

• 4 Mar 2025 · Public Authorities (Fraud, Error and Recovery) Bill (Sixth sitting) · Hansard source

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  As the Minister said, this is a large group of clauses, so I will try to get through them as quickly as I can. However, given that the provisions grant the PSFA the power to impose penalties on individuals and organisations—powers more often associated with a court or a tribunal—it is important that that we are confident that it is going to do so in a fair, proportionate and effective manner and with due regard to the aims of this legislation. Clause 50 grants the Minister the power to impose penalties where, on the balance of probabilities, they are convinced that a person has committed fraud to obtain an incorrect payment for themselves or another, or has committed fraud resulting in a loss to a public authority. The decision to impose a penalty must be made by an authorised officer. The clause states that the fraud must result in a loss to a public authority, but, in evidence to the Committee last week, Dr Kassem raised concerns that fraud is not always financially motivated. She said that “the definition of fraud can be a bit limiting in the current Bill, because, first, it assumes that fraud is happening for financial reasons when that is not necessarily the case. There are non-financial motives…A disgruntled employee can be as dangerous as someone with a financial motive.” –– [ Official Report, Public Authorities (Fraud, Error and Recovery) Public Bill Committee, 25 February 2025; c. 6, Q3.] Will the Government look again at how this Bill might be amended so that it can better tackle fraud carried out for personal gain, even if that gain is non-financial, where it causes the public sector organisation to suffer loss? Clause 51 allows penalties to be imposed on individuals within an organisation. Dr Kassem also said, “when you talk about fraud, you are talking about fraud committed against the public sector by individuals as well as organisations. The procedures cannot be the same in each case”. –– [ Official Report, Public Authorities (Fraud, Error and Recovery) Public Bill Committee, 25 February 2025; c. 5, Q2.] Can the Minister explain how the Bill differentiates between fraud by individuals and fraud by organisations, or are the approaches broadly similar under the Bill? Clause 52 states that a penalty may not exceed 100% of the loss to the public authority or the benefit gained by the individual or organisation. Can the Minister clarify how the Government decided upon that as a maximum penalty? Is there an equivalent figure in other legislation that has been used as a comparator? The Bill allows banks and employers to claim administrative costs when handling fraud-related deductions, as we debated earlier today, so have the Government assessed how administrative costs are likely to compare with penalty amounts? Turning to clause 53 and penalties for non-compliance, the clause allows the Minister to impose a penalty on a person or body that fails to comply with the requirements in chapters 2 and 4. Can the Minister clarify who the authorised officer referred to within the clause is? If they are to decide upon penalties to be imposed, what level of seniority will they have? Will there be any independent oversight of those decisions? Clause 54 sets out liability of individuals for organisational failures and extends penalties to individuals within an organisation that fails to comply with investigatory or recovery requirements. How will failure to prevent non-compliance be assessed? How will due diligence measures be taken into account? Will there be an element of a safe harbour principle, where people can demonstrate that they had sought the best advice or otherwise taken reasonable measures, but that in spite of those the fraud had not been prevented? On clause 55, regarding fixed and daily penalties, the clause sets penalties for failing to provide the information at a daily rate of £300 for continued failure to provide information, or a fixed penalty of £300 for other failures to comply. Can the Minister explain why £300 has been chosen as the penalty amount? Is there any significance to the sum? Clearly, £300 is a significant amount of money for most individuals, apart from the extremely wealthy, but it may not be as significant a sum for many organisations, particularly if we look at serious organised fraud. To what extent does the Minister believe that £300 will prove to be a deterrent or effective penalty?

• 4 Mar 2025 · Public Authorities (Fraud, Error and Recovery) Bill (Sixth sitting) · Hansard source

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  Clause 34 provides the mechanism for account holders to request a review of a ministerial decision to make, vary or refuse to vary a direct deduction order. However, the scope of the review is limited, as the person cannot challenge the existence of the debt or the amount owed at that stage, unless the order incorrectly states the amount. Given that limited scope of review, what can be challenged? Given that the review cannot dispute the existence or amount of the debt, what exactly can be reviewed? In what types of cases would the Government expect a review to be successful? For example, could a review be granted on hardship grounds, or could a review be successful if the deductions cause significant financial difficulties, such as impacting essential living costs? Could a review consider whether the deductions are fair in relation to other debts or financial obligations that the person has, such as child maintenance? Clause 34 sets a strict 28-day deadline for a review request, and there does not appear to be an ability to extend that timeframe, even in exceptional circumstances. By contrast, in employment tribunals the standard time limit for lodging an appeal is three months, and the Employment Rights Bill currently before Parliament proposes extending it to six months. In other legal contexts, extensions are generally granted where the delay was due to exceptional circumstances, such as illness, bereavement or lack of access to legal advice. Might the Government consider allowing some flexibility in this timeframe to allow for such exceptional circumstances? If not, why has a stricter approach been taken here than in other legislation? Clause 34 does not specify whether a joint account holder has the same right to review a deduction order as the primary liable person. Can a joint account holder initiate a review separately, and if so, on what grounds? If a joint account holder does not agree with deductions being taken from their shared account, what recourse do they have? Government amendment 2 appears to be purely technical, removing duplicated provisions. However, can the Government confirm that the amendment does not limit or restrict the review process in any way? To fully understand how the review process will work, further clarity is needed from the Minister on the types of issues that can be successfully challenged in a review; whether the 28-day limit can be extended in exceptional circumstances, and if not, why not; and the rights that joint account holders have to request a review. Can she also confirm that Government amendment 2 does not impact the substantive rights of individuals seeking a review? As with almost every other part of the Bill, it is concerning that the code of practice has not been made available, but perhaps the Minister can provide some additional detail and context, to fill some of the gaps.

• 4 Mar 2025 · Public Authorities (Fraud, Error and Recovery) Bill (Sixth sitting) · Hansard source

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  I am very pleased to have this visibility of an important element of the Bill. That is one of the reasons why it stands out among so many of the references to codes of practice and other regulations yet to be decided. I do not think that the Government will struggle to amend the figure as appropriate, as time goes by, to allow for the changing value of money, but I would like to hear from the Minister whether she feels that there is a risk that the amount of £300 is too low to deter large organisations from ignoring such requests. On clause 59, which confirms that the penalties will be imposed by formal notices, I would like to know about the mechanisms that will be in place for individuals and organisations to challenge the penalty notices specifically, as distinct from challenging the other notices under the Bill. Clause 61 sets the interest on late penalty payments at 2.5 percentage points above the Bank of England base rate. I understand that that is the same as the HMRC interest charge for late payments. Has any economic analysis been conducted to determine whether that level of interest serves as an effective deterrent, based on HMRC’s own experience? Clause 63 states that a penalty cannot be imposed if the person has already been convicted of an offence for the same act. Likewise, if a person has already paid a penalty, they cannot later be prosecuted for the same offence. I thank the Minister for confirming that there will not be a choice on whether to pay a penalty rather than being prosecuted, but I am interested to hear what measures will be put in place for guidance on the decision-making process within the PSFA to ensure that the appropriate channel is used in each case, and that a loophole is not created whereby some individuals or organisations get away with what might be a relatively modest penalty payment, while others are subject to criminal prosecution for similar transgressions. I think I have covered all the clauses. I would be very grateful if in particular the Minister could offer some clarification on the question of why the Bill appears to be limited solely to financial fraud, and on that differentiation between individual organisations.

• 4 Mar 2025 · Public Authorities (Fraud, Error and Recovery) Bill (Sixth sitting) · Hansard source

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  Clause 43, as the Minister said, grants Ministers the ability to suspend and restart deductions under a deduction from earnings order at any time by notifying the employer. As with the equivalent measures relating to direct deduction orders, we are looking for further details on the circumstances in which the Government anticipate that this power is likely to be used and whether the PSFA will be required to regularly review the liable person’s financial situation to assess whether deductions remain fair and sustainable. Is there a systematic review process planned or in place under this legislation to ensure that deductions do not cause financial hardship, or does the legislation rely on the subject of the deduction order appealing against it if those charges become excessive? Clause 45, which relates to applications to vary a deduction from earnings order, allows the liable person to apply to the Minister to vary an order and requires the Minister to notify the individual of their decision. How soon after an order is issued is it envisaged that an individual would be able to apply for a variation? A balance obviously needs to be struck between allowing for variations to reflect genuine changes in the circumstances and preventing people from seeking to frustrate or hold up the system. It would therefore be helpful to have a better understanding of the specific circumstances that are to be considered as valid grounds for varying an order, and whether the Government have any level of expectation as to what percentage of applications will be successful, based on either precedent from other schemes or the operation of the PSFA in its current form. If an application is refused, is there an appeals process beyond clause 49, which provides for the tribunal appeal, or is that envisaged as the final decision-making body? On clause 46 and the process for varying deduction orders, subsection (2) states that before a variation is made, the liable person must be given an opportunity to make representations regarding the proposed changes. If an order is revised, both the liable person and their employer must be notified. Will the Minister outline how a liable person will be able to make representations? Will it be purely in writing, online or via a hearing? Within what timeframe is the liable person permitted to submit that response? Clause 47 grants the Minister the power to revoke a deduction from earnings order, and requires revocation once the full payable amount has been recovered. Beyond recovery of the full amount, in what other circumstances may a deduction from earnings order be revoked? On clause 48 and applications for a review of the Minister’s decision, a liable person can ask for a review. On the timeframe, we discussed extenuating circumstances in relation to other clauses, and the Minister indicated that she was willing to go back and consider whether some flexibility over time periods might be appropriate to allow for exceptional circumstances. Is she able to confirm that that also applies to clause 48? On the grounds for review, the Bill states that applications cannot be based on the “existence or amount” of a payable sum—as the Minister indicated, that will have already been set by an independent body, or will at least be reviewable by an independent body. What grounds for review does she see as being considered valid under clause 48? Skipping ahead to the first-tier tribunal in clause 49, we agree with that provision because, again, it provides an independent avenue for appeal and ensures due process. On the timeframe for lodging that appeal, would it be appropriate to allow appeals that would otherwise be out of time where particular circumstances apply that explain why an application could not be made within the usual 28 days? Although we broadly support the mechanisms set out in clauses 43 to 49, there are key areas where we will be looking for more clarity and detail either today or as the Bill progresses, particularly around the key issues of fairness, proportionality, the application of deduction from earnings orders, and clear, accessible processes for reviews and appeals. Will the Government commit to publishing detailed guidance as early as possible on the processes governing variations, revocations and appeals, and also consider amending the Bill to ensure greater clarity around the very rigid time periods?

• 4 Mar 2025 · Public Authorities (Fraud, Error and Recovery) Bill (Sixth sitting) · Hansard source

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  I agree with what the Minister says about future-proofing. The affirmative procedure does apply to the measures in subsection (3), which are effectively about future-proofing. Our concern is those under subsection (2), which are about how the powers are to be exercised from day one. Those regulations are not subject to the affirmative resolution procedure but are fundamental to how the legislation will be implemented. I ask her to reconsider the fact that this does not affect future-proofing but is about ensuring that Parliament can consider the legislation properly and debate and vote on what could be integral regulations affecting a lot of people.

• 4 Mar 2025 · Public Authorities (Fraud, Error and Recovery) Bill (Sixth sitting) · Hansard source

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  Clause 28 gives account holders the right to request a variation to a deduction order, perhaps in a change of circumstances, and clause 29 empowers the Minister to make such variations. I have some questions for the Minister about the measures. Under what circumstances might she expect the Minister for the Cabinet Office to vary an order, and what criteria would be used to determine whether a variation is justified? Might that include financial hardship, changes in financial circumstances or new evidence regarding the debt? Would variations be considered if a person has multiple debts and can demonstrate that repaying at the original rate would cause undue hardship because of those other repayments? What is the status of any payable amount in relation to sums owed to other creditors? Where would, for example, the Public Sector Fraud Authority stand compared with other creditors who are owed either secured or unsecured debts? Let me turn to the process and authority for variation decisions. How will those variations be processed? What timeframe is expected for a decision after a variation request is submitted? Given that the Minister will delegate these functions to the PSFA, what level of seniority within the PSFA will be required to approve variations? Will it be as for the issuing of other notices, or will a more senior level be required? To return to the question of codes of practice, will there be internal guidelines within the PSFA to ensure consistency and fairness in decision making and that similar applications are treated similarly? Clause 30 states that a direct deduction order must be revoked when the full payable amount has been recovered or the liable person has died. What happens to the outstanding sum that would otherwise be payable after a death? Does it mean that if the liable person dies, the Government will either not seek to recover funds or must do so through mechanisms other than this legislation? In most cases of debt collection, there are provisions to recover debt from a deceased person’s estate. Why does the clause not specify that, or is it provided for in other parts of the Bill? If the estate has sufficient funds, will the Government pursue repayment through probate or will they write off the debt entirely? Would there be any exceptions where the Government may still seek repayment? Clause 31 allows the Minister to issue another information notice to a bank to obtain details necessary to decide whether to revoke or vary a deduction order. Powers under the clause closely resemble those used for the original information request, so many of the concerns we have raised about those requests obviously apply to this clause as well. What additional information might the Minister expect banks to provide the second time around, and if the original information notice was already comprehensive, what new details could justify issuing a further request? Does this suggest that banks may be asked to monitor accounts over a longer period than was indicated in the original information request? How often can the Minister request additional information? Is there a limit on how frequently banks and other financial institutions must comply, in order to prevent these measures from becoming overly burdensome and onerous? Clause 32 allows the Minister to suspend and later restart deductions by notifying the bank. Will she clarify the circumstances under which she would expect deductions to be suspended? Might that include cases in which the liable person has appealed the deduction, for example, or in which the person’s financial situation has changed? Perhaps they have lost their job or there is a change in family circumstances. Will the provision apply where the Government wish to reassess eligibility for deduction, or where the bank raises concerns about the impact of deductions on the account holder? Once more, the lack of a draft code of practice makes it difficult to scrutinise the provision effectively. What safeguards will be in place to ensure that deductions are not arbitrarily suspended or restarted? Will there be any independent oversight of these decisions? Restarting deductions, in particular, risks a negative impact and potential financial harm for the subject. Clause 33 follows on from clause 30 and states that a bank must stop deductions once it becomes aware that the account holder has died. Again, we do not disagree with the mechanism in relation to these clauses, but how does the Minister expect banks to be informed of a person’s death in a timely manner? Will that be through the usual process following a death, whereby an executer is perhaps conducting the deceased’s financial affairs? Will there be any other mechanism to ensure that the deductions are not taken in the meantime, at what can obviously be an extremely busy time? Are banks expected to proactively check for death notifications, or will the Government notify them in the absence of a family notification? If deductions continue after death, what mechanisms exist for refunding the estate? We have also raised wider concerns in relation to other parts of the Bill about ministerial power and the lack of independent, third-party oversight. These clauses, like many others, grant significant power to the Minister regarding deductions, variations and revocations, but they do not require oversight from an impartial third party outside the Cabinet Office or the PSFA. Will she address concerns about whether the Minister and the PSFA have the practical capacity to handle these decisions in a timely manner? What resources will be allocated to the PSFA to ensure that this can be done without unnecessary delay? Decisions about deductions, variations and revocations are all made by the Minister or their delegate with no independent oversight. Might an independent appeals body provide fairer scrutiny? In the absence of such an independent appeals body, might there be the risk of judicial review in certain cases? To fully understand how these provisions will work in practice, we will require further clarity from the Minister on many of those issues. What circumstances justify varying a deduction order and which criteria will guide these decisions? How and when might deductions be suspended or restarted and will there be oversight of these decisions? Is debt recovery pursued from estates after death? Are fraud and error debts written off, and if they are to be pursued, through what mechanism? What additional information might banks be asked to provide under clause 31? Does that place an unreasonable burden on them? Given that the Minister has indicated that a code of practice will govern these processes, it is again deeply frustrating that that document has not been made available for scrutiny during the passage of the Bill through this House. We therefore ask that the Minister provides as much detail as possible on how the Government expect those provisions to be implemented in practice.

• 4 Mar 2025 · Public Authorities (Fraud, Error and Recovery) Bill (Sixth sitting) · Hansard source

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  The clause allows individuals to appeal to the first-tier tribunal if they disagree with the decision to make, vary or refuse to vary a direct deduction order. This right of appeal, however, is available only after the individual has completed the review process under clause 34. The appeal must be made within 28 days of the review outcome. I ask again, regarding the strict 28-day appeal deadline, why there is no provision for extension under any circumstances. In the previous grouping, I mentioned other tribunals where either longer periods of time to make the application are available or there is provision for extending the deadline in cases of genuine hardship or exceptional circumstances, or in most cases, both. It comes back to the question why the stricter approach has been taken in this Bill, compared with other areas of law. Although I understand the need to recover money owed to the taxpayer as quickly as possible, we need to ensure that justice can be done without procedural requirements unfairly and unnecessarily impeding someone for what might only be a question of days, or possibly a week or two, in circumstances that few of us would wish to be in. The first-tier tribunal is a respected independent body, so it is extremely welcome that appeals can be made there. The tribunal, however, only gets involved after the internal review by the PSFA or officials acting on behalf of the Minister. Is it the Minister’s expectation that the internal review process will filter out most of the reviews and provide some resolution before they get to the tribunal? Having this two-stage process potentially extends the time for reviewing and appealing rather longer, and goes against what I think the Minister and the Bill intend. Is it intended to resolve most issues at the early stage to avoid referral to the first-tier tribunal, and if so, what confidence does the Minister have that the PSFA’s internal review process will be sufficiently robust? Given that it is part of the initial decision-making process, fairness must not only be done, but be seen to be done, to avoid the need for recourse to the first-tier tribunal. Does the Minister have an estimate of how many cases would be expected to be resolved in the PSFA review process, against how many might need to proceed to the tribunal? If the vast majority of cases are expected to be settled internally, that reduces the burden on the tribunal system, but what safeguards are in place to ensure fairness and prevent conflicts of interest? If a significant number of appeals do reach the tribunal, are the Government confident that the tribunal system has the capacity needed to handle them? Could the Minister provide clarity on why the 28-day appeal period is so rigid? Will the Government look at whether there is scope for it to be extended in exceptional circumstances? Will the internal review mechanism serve a meaningful function, or might the first-tier tribunal act as the better first-instance review? Was the decision based on legal, practical or resource considerations? What proportion of cases is expected to be resolved internally rather than requiring a tribunal appeal, and what steps are being taken to ensure that the tribunal system is adequately resourced for any additional caseload? As with almost all elements of the Bill, some aspects will be clearer when there is finally a draft code of practice, but given that the Committee will not see it during our consideration of the Bill, will the Minister address those questions and provide some transparency and detail, to ensure that individuals subject to direct deduction orders are treated fairly and have genuine access to justice?

• 4 Mar 2025 · Public Authorities (Fraud, Error and Recovery) Bill (Sixth sitting) · Hansard source

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  Clause 42 provides that when an employer receives a deduction from earnings order, they may also deduct an amount from the liable person’s earnings to cover reasonable administrative costs incurred in complying with the order. As with the mirror provision for banks, we need greater clarity on what will be considered reasonable administrative costs for employers, and what the Minister would expect to appear in the regulations. Specifically, can the Minister provide a definition or specific example of the costs that employers may claim? Have the Government conduced an assessment of the potential financial impact of this provision on employers, on the total funds ultimately recovered by the Treasury and on the subject of the deduction order? Will there be a cap on the amount employers can deduct, to prevent excessive costs? The Minister referred to a framework. I do not know whether she meant to suggest that there might be a percentage cap and whether that is how she intends this to operate. If employers are able to deduct costs, there is a risk that a significant portion of recovered funds, or employees’ earnings, could end up being absorbed by employers’ administrative expenses, rather than being returned to the public purse or finding their way into the employee’s pay packet. Clause 42 gives the Minister the power to make regulations regarding those costs. Given the lack of detail at the moment as to what would be contained in those regulations, can the Minister at least outline what specific types of regulations the Government expect to introduce under that power? Presumably, she will commit to consulting the normal range of stakeholders—employers, employee groups and other stakeholders—before setting those regulations. Will the regulations include a maximum allowable deduction—either a fixed sum or a proportion of the value of the order—to prevent disproportionate employer charges? We are content for clause 42 to stand part of the Bill, as the principle of allowing employers to recover genuine and proportionate costs is reasonable, given the responsibilities being placed on them. However, we need the Government to provide an adequate explanation as to how this provision will operate in practice. We urge the Minister to provide clear assurances that the measure will prevent excessive deductions, while allowing employers to make sure that they are not out of pocket as a result of administering a deduction from earnings order. If the Minister can outline the specific safeguards to ensure that the employer cost deductions remain fair, transparent and proportionate, we are happy for the clause to remain in the Bill.

• 4 Mar 2025 · Public Authorities (Fraud, Error and Recovery) Bill (Sixth sitting) · Hansard source

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  My hon. Friend is of course absolutely right. We are told that many of these questions will be addressed at a later date, whether through regulation or through a non-statutory code of practice, but we are being asked to consider this Bill now, and scrutinise these clauses when that information is not available. Will the Minister reconsider, and look at where affirmative resolution procedure can be used instead, to ensure that the regulations receive proper and active parliamentary scrutiny, so that the new obligations are imposed only where they have the consent of Parliament? Given the potential financial consequences of direct deduction orders for individuals and businesses, it really is not sufficient for the Government to ask Parliament to trust that these measures will be applied fairly and proportionately after the fact unless we can have a far greater degree of detail now. As my hon. Friend said, the clause does include a requirement for the Minister to consult with representatives of banks and financial institutions, representatives of those directly affected by these provisions, and any other appropriate persons when making regulations; we welcome that provision. However, consultation is of course only meaningful, as my hon. Friend said, if it is conducted transparently and robustly. So will the Minister commit to publishing responses to consultations under this clause, and how will the Government ensure that such responses are meaningfully reflected in the final regulations? What mechanisms will be in place to ensure that consultation is not merely a box-ticking exercise, but is a genuine dialogue with stakeholders, so that they feel rather more engaged than the representatives of UK Finance indicated that they felt when giving evidence last Tuesday? Under subsection (3) the Minister is granted the power to extend clauses 17 to 36 to other types of financial service providers in the future. Of course that would, and is intended to, allow regulations to cover other types of financial services, such as cryptocurrencies, should they become regulated by the Government. It is right that the Government have chosen to use the affirmative resolution procedure for those measures, requiring parliamentary approval before such regulations take effect, and we completely agree that that level of scrutiny is appropriate. However, it raises a fundamental question of consistency. If the Government recognise that extending these provisions to cryptocurrencies and new financial models requires a higher level of scrutiny, why do they not apply the same principle to the core framework for direct deduction orders? Why are only some of these significant regulation-making powers subject to affirmative oversight, while others are pushed through with minimal scrutiny and almost certainly no parliamentary debate? Parliament cannot be expected to sign a blank cheque when it comes to the application of these financial recovery mechanisms, particularly when key details remain unknown and are deferred to future regulations. Until the House has had the opportunity to scrutinise the code of practice, and to assess how these provisions will be applied, it is wholly inappropriate to proceed on the basis of the negative procedure that would apply under much of the clause. We urge the Minister to reconsider, and to ensure that Parliament is given the opportunity to properly scrutinise, and approve, these critical regulations. Finally, would the Minister commit to strengthening the scrutiny provisions in the clause, rather than expecting Parliament to rubber-stamp measures that remain currently unseen and largely undefined?

• 4 Mar 2025 · Public Authorities (Fraud, Error and Recovery) Bill (Sixth sitting) · Hansard source

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  We have tabled amendment 20 to remove the cap on the maximum deduction in cases of fraud. I should say from the outset that we would not expect deduction orders of above 40% to be used in most circumstances. For most circumstances, 40% is an appropriate maximum level for deduction orders to be set. However, we question whether having the legislative cap removes some flexibility. There might be particular circumstances where a lump sum deduction order would otherwise be imposed but there was not sufficient credit to be able to recover that money if a very high-income individual or organisation were involved without discoverable accounts from which a lump sum order might be made. In those circumstances, it might be appropriate for the Minister to seek an earnings deduction order of above 40%, if they are satisfied that the behaviour has been fraudulent and has caused loss to the taxpayer. As we said this morning, our reasoning is simple. If an individual has committed fraud, then they ought to return the money as quickly as that can reasonably be done without causing extreme hardship and adversity. We have various concerns about the decision making within PSFA, but the capacity and ability of officers to make the decisions on affordability apply whether it is a 20% deduction order or a 99% deduction order—we need to resolve the decision-making process in any event. This is a probing amendment asking the Government to look at whether 40% will be appropriate in all circumstances and, if not, whether this can be managed through other means. I move on to the broader content of clause 41. The clause sets out the proportion of a person’s net earnings that may be deducted to recover amounts lost due to fraud or error. The Bill specifies that in cases of fraud, the Public Sector Fraud Authority may deduct up to 40% of a person’s net earnings for the affected period. In cases of error, the PSFA may deduct up to 20% of net earnings. It is that first figure that we seek to change with our amendment. We have concerns about the balance of probabilities standard that clause 41 relies on, which means that the PSFA must determine on this relatively low civil standard of proof whether the loss was due to fraud or error. That issue arises at various points in the Bill. It is a material distinction, as it significantly affects the deduction imposed on individuals. Although we certainly support the Government’s seeking to recover 40% where individuals or organisations have the means to pay such an order, we would encourage the Government to consider whether, in very exceptional circumstances, that figure ought to be increased. As Dr Kassem highlighted in evidence to the Committee, in regard to assessing fraud, “Do we have criteria that tell staff in the public sector how to differentiate between fraud and error? Is that agreed upon criteria to ensure that errors are not happening? Are they trained and do they have the proper skills to enable them to investigate without accusing, for example, innocent people and impacting adversely vulnerable individuals?” –– [ Official Report, Public Authorities (Fraud, Error and Recovery) Public Bill Committee, 25 February 2025; c. 6, Q2.] That critical question goes across clause 41. I ask the Minister: how will PSFA staff be trained to make that distinction that Dr Kassem said was so difficult to reach? What agreed-upon criteria will they use to make those determinations? Will independent oversight be in place to prevent wrongful allegations of fraudulent behaviour? The potential for subjectivity and inconsistency in these judgments could have serious consequences for those affected. We return to the issue of the code of practice, which will appear at some point before Royal Assent. The Minister is asking the House to legislate for sweeping powers without setting out the practical framework in which they will operate. It would be helpful if we could have further detail on whether elements of the code of practice might be published in draft form at an earlier stage, to allow Parliament to consider them as the Bill progresses, or at least detail as to how the Minister foresees the code of practice addressing the distinction between fraud and error.

• 4 Mar 2025 · Public Authorities (Fraud, Error and Recovery) Bill (Sixth sitting) · Hansard source

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  The clause grants the Minister the power to issue a deduction from earnings order in cases where an individual is employed and has an amount that is recoverable under the Bill. The effect of such an order would be to require the person’s employer to deduct payments directly from their salary and to ensure that those deductions are paid directly to the Minister in accordance with the terms of the order. The order itself will be provided both to the liable person and their employer and will set out the amount to be deducted, the timing and duration of those deductions and penalties for non-compliance, which would be enforceable under the powers provided in chapter 5.

• 4 Mar 2025 · Public Authorities (Fraud, Error and Recovery) Bill (Sixth sitting) · Hansard source

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  As the Minister said, this clause establishes the definition of a bank, among other things, for the purposes of the Bill, ensuring that financial institutions responsible for holding and transferring funds fall within its remit. However, the definition is broad enough to include both traditional high street banks—institutions with long-established infrastructures for compliance and regulatory oversight—and electronic money service providers such as digital banking platforms PayPal and Revolut, which operate under electronic money regulations rather than conventional banking licences. Clearly, the intention behind this broad definition is to ensure that all financial entities where individuals may hold funds are captured under the Bill’s provisions, preventing fraudsters from circumventing recovery mechanisms by moving money into non-traditional accounts. However, we would like to hear the Minister’s view on whether there are any practical differences in execution between financial institutions; a key concern is that direct deduction orders and information notices might not be executed uniformly across different types of financial institutions due to variations in their operational structures. Whereas traditional banks have well-established compliance frameworks, making it relatively straightforward for them to implement direct deduction orders, electronic money service providers may operate differently, often without physical branches and storing funds in pooled accounts rather than individual ones. Whereas banks may have concerns around how the direct deduction orders interact with their existing legal obligations such as safeguarding funds for overdraft protection or outstanding debt, the practical questions that arise with electronic money service providers are around how direct deductions will be handled for digital wallets that do not hold fixed balances. Will the money providers be required to prioritise Government deductions over pending transactions, or are there existing verification mechanisms? Are those set out in this legislation robust enough to prevent misidentification or errors? Ensuring clarity and consistency in how deductions are applied across both types of financial institution will be critical to prevent unintended gaps in enforcement.

• 4 Mar 2025 · Public Authorities (Fraud, Error and Recovery) Bill (Sixth sitting) · Hansard source

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  Clause 44 introduces new obligations for liable persons and their employers in relation to deduction from earnings orders. The clause requires that, if a liable person leaves employment, they must notify the Public Sector Fraud Authority, and, if they start new employment, they must notify the Minister, including a statement of their expected earnings in any new roles. Employers are also subject to strict notification requirements. If an employer hires a liable person who is subject to a deduction from earnings order, and is aware of that, they must notify the Minister within 10 days of hiring the individual and provide a statement of the liable person’s expected earnings. How will the Government ensure that those new requirements do not create unnecessary administrative burdens for employers? To what extent do they fit into obligations that employers, and particularly new employers, already have? Will there be a simplified digital system for submitting notifications? Can that be done alongside other notifying processes that employers must already follow? To what extent have the Government engaged with businesses, particularly small and medium-sized enterprises, to assess the impact of the new obligations? On the notification process, how exactly are liable persons and employers expected to submit these notifications? Will it be an online portal or physical documentation? Will there be a standardised form or system to streamline that process? Can the Minister also confirm what penalties or consequences will apply if either a liable person or an employer fails to comply with these notification duties? Will there be a grace period or flexibility for employers who unintentionally fail to meet the 10-day notification requirement? As with other clauses in the Bill, it would have been helpful to see the draft code of practice before assessing how this clause will operate in practice. It would be helpful if the Government published detailed guidance during the passage of the Bill on how they intend to regulate the responsibilities of both employers and individuals. Clause 44 imposes important compliance obligations, so it is critical that these do not unfairly burden employers or create practical difficulties for individuals subject to deduction orders. Will the Minister provide as much detail as possible, as early as possible, on the notification process before the clause comes into effect?

• 4 Mar 2025 · Public Authorities (Fraud, Error and Recovery) Bill (Sixth sitting) · Hansard source

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  The clause grants the Minister extensive powers to introduce further regulations governing the operation of direct deduction orders. Specifically, the Minister will be able to regulate the manner in which notices and orders are issued by the Minister; the process by which banks and financial institutions provide information to the Minister; the methodology for calculating the amounts to be deducted from an account; the legal obligations of banks in relation to compliance with direct deduction orders; the costs that banks may recover, either under clause 24 or from the Minister, and the interaction of direct deduction orders with other similar financial recovery mechanisms. These regulations are largely subject to the negative resolution procedure under this clause, which means that they will potentially become law without debate or a vote unless actively prayed against within Parliament. The use of the negative resolution procedure is clearly concerning given our lack of sight of the basics, such as a draft code of practice. The negative resolution procedure may be appropriate for minor technical amendments, but it really is not for measures that could directly impact on individuals’ finances, financial institutions and the broader regulators framework, particularly when the House of Commons has been given so little information to consider the context of the framework legislation within which those regulations are being issued. Under the Bill, Parliament is being asked to approve a framework without any clarity on its implementation, while being told to accept that further critical details will be determined by ministerial discretion, and that the code of practice will be published at some point during the Bill’s progress through the House of Lords and without proactive scrutiny from the House of Commons. Can the Minister explain why this approach has been taken? Can she look at where the use of the affirmative resolution procedure would be more appropriate in ensuring that there is active parliamentary consent for what might be powers quite fundamental to the purpose of the Bill and might have a significant impact on individuals, financial institutions and many businesses?

• 4 Mar 2025 · Public Authorities (Fraud, Error and Recovery) Bill (Sixth sitting) · Hansard source

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  I beg to ask leave to withdraw the amendment. Amendment , by leave , withdrawn Clause 41 ordered to stand part of the Bill. Clause 42 The employer’s administrative costs Question proposed, That the clause stand part of the Bill.

• 4 Mar 2025 · Public Authorities (Fraud, Error and Recovery) Bill (Sixth sitting) · Hansard source

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  I struggle with my own name at this point in the afternoon, Sir Desmond. I beg to move amendment 20, in clause 41, page 25, line 16, leave out “40% of”.

• 27 Feb 2025 · Public Authorities (Fraud, Error and Recovery) Bill (Third sitting) · Hansard source

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  His Majesty’s Opposition agree with the Bill’s principles and support the Government in what they are seeking to do, but we will be using our best efforts to try to help them do it better where we can. As the Minister said, clause 1 sets out the functions. Those functions seem perfectly sensible and reasonable, as does the way in which the Minister for the Cabinet Office is to interact with other public authorities as set out in clause 2. One of the themes that runs throughout almost all clauses of the Bill is the issue raised by multiple witnesses on Tuesday about how the functions to be allocated to the Minister or their representatives are to be exercised within the various codes of practice provided for in the Bill. On Tuesday, the Minister seemed to indicate that the Government intend for those codes of practice to be made available for the House of Lords to scrutinise, but not for the House of Commons. That obviously makes it much more difficult for the Committee to consider the appropriateness of those functions and the various powers in the Bill. I urge the Government again to reconsider and look at how the House of Commons can be given those chances before our House completes its consideration. We recognise that that will not be possible in Committee. In August 2022, the previous Conservative Government established the Public Sector Fraud Authority within the Cabinet Office. We welcome the Bill taking that work forward by establishing the PSFA as a separate body from the Cabinet Office, to which the Cabinet Office is able to transfer functions. We entirely support the Government’s efforts to tackle fraud and error. The National Audit Office puts the amount lost by fraud and error in the range of £5 billion to £30 billion in 2023-24, so ensuring that the Bill works to tackle both error and fraud is crucial within the functions set out in clause 1, and we will come on to that with some of our amendments to later clauses. Equally, we wish to ensure that the functions assigned to the Minister for the Cabinet Office are proportionate and capable of independent review and oversight. We will return to these important issues with our amendments later on. I would like to ask the Minister some questions on clauses 1 and 2, the first of which is about the definitions. The Bill does not provide definitions of “fraud against a public authority” or “error”. As we heard in evidence on Tuesday, Dr Kassem from Aston University stated that “the definition of fraud can be a bit limiting in the current Bill, because, first, it assumes that fraud is happening for financial reasons when that is not necessarily the case. There are non-financial motives. Let us consider insider fraud—fraud committed by insiders, people working for the public authorities—which is one of the most common threats not just in the public sector, but across other sectors. A disgruntled employee can be as dangerous as someone with a financial motive. So I would stick with the Fraud Act 2006 definition of fraud, because it mentions personal gain full stop. It can be financial and it can be non-financial. That has to be clarified.” –– [ Official Report, Public Authorities (Fraud, Error and Recovery) Public Bill Committee, 25 February 2025; c. 6, Q3.] Really, it must be clarified within the functions set out for the Minister for the Cabinet Office. Why should that not be the case, and how does the Minister define these things for the Bill, if it is not in line with the Fraud Act 2006? Clause 2(3) also states: “The Minister may charge another public authority a fee in relation to the exercise of functions under this Part on behalf of, or in relation to, the public authority.” Can the Minister clarify what we would expect that fee to be? Is it arbitrary or a set amount? Does the Minister decide or is there a particular process? I would also like to ask the Minister about the amounts that the Government expect to recover under the Bill. According to its impact assessment, the powers in part 1 are estimated to lead to around £54 million—the best estimate for net present benefits—being recovered from public sector fraud over 10 years. Can the Minister reassure the Committee how robust that estimate is, what it is based on and how confident the Government are that the full amount of money will be recovered? The reason I ask that is because, for the Government across the 10 years, the best estimate for fraud recovered minus costs is £23 million. Different numbers of cases could mean a loss or a slightly higher return, which could be between minus £1.5 million and £24 million. How will the Government ensure that the Bill recovers more money than is paid out in costs in administering its functions? As clauses 1 and 2 are the foundation for establishing the PSFA, the Opposition are content for them to stand part of the Bill.

• 27 Feb 2025 · Public Authorities (Fraud, Error and Recovery) Bill (Third sitting) · Hansard source

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  The amendments are all about ensuring that there is not just independent oversight but an effective independent channel of appeal against information notices that does not just go back to the same organisation that issued the original notice. Clause 4 will allow for the person to whom the information notice is given to appeal the notice up to seven days after it is issued, but that appeal will go back to the Minister for the Cabinet Office—or, in practice, the PSFA—to review it and decide whether to revoke, amend or uphold the notice. As drafted, it gives the Minister significant power, as really the only responsible person who can review the decision to give the notice. There therefore appears to be a significant lack of independent oversight. I would be grateful if the Minister could explain why there is no ability to have an independent appeal of the kind that would generally take place against HMRC decisions and notices, through the first-tier tribunal. That is why we tabled amendments 15, 16, 17 and 18: to change the appeal body from the Minister for the Cabinet Office to the first-tier tribunal. We are concerned that, given it is the Minister who has been given the power to investigate fraud, it is then a case of allowing the Minister to mark their own homework if they—or the people acting on their behalf—review the decisions themselves. I would like to understand the Minister’s view on whether that is an effective use of ministerial time and capacity. Does she envisage that any such appeal decisions would be delegated? In the amendments, we propose to replace the Minister with the first-tier tribunal in that process, which would be equivalent to the processes that would be expected when a decision of HMRC is reviewed. Our amendments would ensure that an independent third party is involved with the review process. I would be grateful if the Minister could explain why there should be no ability for such an appeal to be made, whether it is made immediately against the notice for information or perhaps as a second appeal stage. We need to be satisfied that there is a good reason why people who are the subject of those notices, which may be quite onerous, particularly for individuals and smaller organisations, should not have the ability to appeal to an independent body. Normally, natural justice would assume that to be the case.

• 27 Feb 2025 · Public Authorities (Fraud, Error and Recovery) Bill (Third sitting) · Hansard source

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  I think we will come back to this issue at a later stage. I want to see some action on amendment 11 going forward, but, for now, I beg to ask leave to withdraw the amendment. Amendment, by leave, withdrawn.

• 27 Feb 2025 · Public Authorities (Fraud, Error and Recovery) Bill (Third sitting) · Hansard source

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  Amendments 12 and 13 are in a similar vein to amendment 14 —they allow the individual or organisation issued with an information notice to apply to the independent body or board for an extension to the 10 working days within which they are currently required to provide information requested in the notice, if they are reasonably unable to comply. Sorry, have I skipped ahead a section?

• 27 Feb 2025 · Public Authorities (Fraud, Error and Recovery) Bill (Third sitting) · Hansard source

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  Sorry, it has been a while since I have been on a Bill Committee. The amendments would allow the individual or organisation to apply for an extension to the 10 working days within which they are currently required to provide information requested in an information notice, if they are reasonably unable to comply. This is a common sense approach to support people who are engaging with the process and prevent them from being hit with penalties, which was never the intention of the legislation. This is also important because we do not know precisely what information the Minister will be able to ask individuals to provide, other than that an information notice cannot require the giving of particularly sensitive—such as excluded or special procedure—material, as defined in sections 11 to 14 of the Police and Criminal Evidence Act 1984. This includes confidential business records or journalistic material. Otherwise, the Minister for the Cabinet Office has a very open-ended power to require different types of information. It would be helpful if the Minister could explain whether the Government would consider allowing those issued with information notices to apply specifically for an extension if they cannot reasonably provide the information within the time period requested.