225: Schedule 11, page 247, line 22, leave out “may” and insert “must”
Member’s explanatory statement
This amendment would make it a requirement for the Secretary of State to issue a code of practice in connection with the use of account information notices.
My Lords, in moving Amendment 225, I will speak to the other amendments in this group. They cover two issues: first, the code of practice, which features in Part 2 of new Schedule 3B, inserted by the Bill into the Social Security Administration Act 1992. Paragraph 6(1) of new Schedule 3B says:
“The Secretary of State may issue a code of practice in connection with account information notices”.
Amendment 225 would change “may” to “must”. Paragraph 6(2) mentions some matters that a code “may” include and Amendment 226 would change that “may” to “must”.
Amendment 227 would ensure that a code of practice includes the criteria to be used by the Secretary of State in determining whether to issue account information notices—I will come back to criteria shortly. Amendment 230 would require the Government to consult on the draft code of conduct with consultees including the Social Security Advisory Committee and organisations that would have to comply with account information notices. Amendment 231 would require the code of practice and any revisions to it to be approved by both Houses of Parliament. The Secretary of State would still be able to withdraw a code of practice, but the ability to issue notices would lapse if no code were in force. Amendments 228, 229 and 232 are consequential.
The other matter covered in this group is how the Government report to Parliament on these notices. Amendment 233 amends new Schedule 3B to provide for annual reporting to Parliament on the use of account information notices. As well as requiring the provision of statistics around the use of such notices during the previous financial year, the amendment would compel the Secretary of State to outline his or her views on the proportionality and effectiveness of notices. I hope that the need for these amendments is self-evident. Ministers are proposing to take new powers of astonishing breadth, which will involve the ability to search the bank accounts of tens of millions of our citizens, most of whom will have done nothing wrong. There is still very little detail about how these powers could be, or will be, used.
My Lords, I apologise to the Committee that duties elsewhere in the House prevented me from attending the last two debates on Monday and so from speaking to the amendments that I had tabled and signed. However, I have read the Official Report with care.
I cannot pretend to be a data protection nerd, or even a social security nerd, like some speakers in those debates, but I hope that I pass muster as a surveillance nerd, having written for the Home Secretary two of the reports that informed the Investigatory Powers Act 2016 and, more recently, a report that informed the Investigatory Powers (Amendment) Bill, which I see is to be given Royal Assent tomorrow.
I support all the amendments in the name of the noble Baroness, Lady Sherlock, in this group. Of course there must be a code of practice. Of course it must be consulted on and scrutinised. I would add that that of course we could not contemplate passing this schedule into law until we have seen and studied it. An annual report of the sort that accompanies the reasonable suspicion power to issue financial institution notices, exercised by HMRC under Schedule 36 to the Finance Act 2008, would also be useful. For example, it is from the last of those reports, dated January 2024, that I learned that these reasonable suspicion tax information powers were now being used to obtain location data—something that it had previously been said would not be done.
Dan Squires, one of the authors of the legal opinion that I know was referred to on Monday, is not only a King’s Counsel but a deputy High Court judge and a genuine expert in this area. He and his junior, Aidan Wills, point in that opinion to the personal nature of some of the data that could be harvested under the proposed power and advise that Schedule 11 does not come close to the safeguards required for compliance with Article 8. They refer in particular to the striking lack of clarity about the grounds on which and the circumstances in which the proposed power can be used, as well as to the absence of both independent authorisation and independent oversight. They point out that, although saving up to £600 million over five years is a very important objective, it weighs no more heavily—indeed, probably less heavily—than the normal justifications for obtaining information in bulk: protecting national security and the prevention and detection of serious crime. Their opinion is well referenced, persuasive and consistent with the view on proportionality expressed by both the Information Commissioner and the Constitution Committee, on which I sit.
In the two previous groups, I raised pension credit, and it is notable that the noble Viscount the Minister has not responded on that point. As such, my automatic assumption is that he believes that the implementation of these powers will deter people from seeking pension credit, which is contrary to the Government’s declared policy to encourage people. I mention that in passing, given this opportunity.
My other moan is about the impact assessment; there is none. I do not like the impact assessment that we have. It is a totally impenetrable and meaningless document, which is clearly there just as a matter of form rather than as a serious attempt to try to inform participants in these debates about what is in the Bill and what impact it will have on people and organisations.
My specific points are broadly in line with the points raised by UK Finance, the overall organisation for financial organisations, including banks and insurance companies, which continues to have serious concerns about these provisions. I think we should listen carefully to what it says. In particular, if we are going to have these powers then, in line with the amendments tabled by my noble friend Lady Sherlock, we have to make sure that they are introduced in an effective way that appreciates the vulnerabilities of customers.
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UK Finance is concerned about the design and proportionality of these proposals, the impact on vulnerable customers and financial organisations’ consumer duty, which was introduced under wide-ranging powers under other Acts of Parliament, to consider and look after the interests of their customers. To what extent does this power run across their consumer duty? Any involvement in implementing these powers has to comply with their consumer duty.
UK Finance also emphasises that the one-off aspect of these proposals is bad. It is unhappy that it is a one-off; this should be part of an overall strategy to deal with fraud and financial misunderstandings within the sector. Just picking it off as one particular aspect, when it is a much wider issue, is a matter of concern to it. It is also concerned—perhaps this is something I would urge my noble friend to think about when we come back to this issue on Report, which I am sure we will—that charities and social organisations that represent people who are less able because of income or background to cope with these issues will be involved in the consultation on this code of practice. I am totally in favour of my noble friend’s proposals, but I suggest that consultation needs to go somewhat wider than the list in the amendment.
My Lords, it has been a privilege to be at the ringside during these three groups. I think the noble Baroness, Lady Sherlock, is well ahead on points and that, when we last left the Minister, he was on the ropes, so I hope that to avoid the knock- out he comes up with some pretty good responses today, especially as we have been lucky enough to have the pleasure of reading Hansard between the second and third groups. I think the best phrase that noble Baroness had was the “astonishing breadth” of Clause 128 and Schedule 11 that we explored with horror last time. I very much support what she says.
The current provisions seem to make the code non-mandatory, yet we discovered they are without “reasonable suspicion”, the words that are in the national security legislation—fancy having the Home Office as our model in these circumstances. Does that not put the DWP to shame? If we have to base best practice on the Home Office, we are in deep trouble.
That aside, we talked about “filtering” and “signals” last time. The Minister used that phrase twice, I think, and we discovered about “test and learn”. Will all that be included in the code?
All this points to the fragility and breadth of this schedule. It has been dreamt up in an extraordinarily expansive way without considering all the points that the noble Lord, Lord Anderson, has mentioned, including the KC’s opinion, all of which point to the fact that this schedule is going to infringe Article 8 of the European Convention on Human Rights. I hope the Minister comes up with some pretty good arguments.
My final question relates to the impact assessment–or non-impact assessment. The Minister talked about the estimate of DWP fraud, which is £6.4 billion. What does the DWP estimate it will be after these powers are implemented, if they are ever implemented? Should we not have an idea of the DWP’s ambitions in this respect?
My Lords, this has been a somewhat shorter debate than we have been used to, bearing in mind Monday’s experience. As with the first two groups debated then, many contributions have been made today and I will of course aim to answer as many questions as I can. I should say that, on this group, the Committee is primarily focusing on the amendments brought forward by the noble Baroness, Lady Sherlock, and I will certainly do my very best to answer her questions.
From the debate that we have had on this measure, I believe that there is agreement in the Committee that we must do more to clamp down on benefit fraud. That is surely something on which we can agree. In 2022-23, £8.3 billion was overpaid due to fraud and error in the benefit system. We must tackle fraud and error and ensure that benefits are paid to those genuinely entitled to the help. These powers are key to ensuring that we can do this.
I will start by answering a question raised by the noble Lord, Lord Anderson—I welcome him to the Committee for the first time today. He described himself as a “surveillance nerd”, but perhaps I can entreat him to rename himself a “data-gathering nerd”. As I said on Monday, this is not a surveillance power and suggesting that it is simply causes unnecessary worry. This is a power that enables better data gathering; it is not a surveillance or investigation power.
The third-party data measure does not allow the DWP to see how claimants spend their money, nor does it give the DWP access to millions of people’s bank accounts, as has been inaccurately presented. When the DWP examines the data that it receives from third parties, this data may suggest that there is fraud or error and require a further review. This will be done through our normal, regular, business-as-usual processes to determine whether incorrect payments are indeed being made. This approach is not new. As alluded to in this debate, through the Finance Act 2011, Parliament has already determined that this type of power is proportionate and appropriate, as HMRC already owns similar powers regarding banking institutions and third parties in relation to all taxpayers.
I take the Minister’s point and I will settle for the appellation “investigatory powers nerd”; I am quite happy with that. Does the Minister agree with me, however, that the legal difficulty —we see this with the other bulk powers already in our law—is that Article 8 of the European convention locks in not when a human eye gets stuck into the detail, but as soon as a machine harvests the data in bulk? Most of that data relates to people in respect of whom there could be no possible suspicion. Satisfying the requirements of necessity and proportionality must be done even at that stage. I understand that that is awkward and I am sure a lot of people would prefer that it was otherwise, but that is, as I understand it, the law. That renders the distinction that the Minister seeks to draw between data gathering and surveillance perhaps slightly difficult to maintain.
If I may just answer that question from the noble Lord, Lord Anderson; I think it is important to take one question at a time.
I have every sympathy with what the noble Lord has said. As I mentioned on Monday, points could easily raised about that—I think it may have been the noble Baroness, Lady Kidron, who raised points about computers and their robustness. This is the very point that we agree with. It is incredibly important and we have started already to draw up a proper code of practice to work with the banks on how this will actually work. We need continued time to work these issues through. I also made the point on Monday that, at the end of the day, a human being will be there—must be there—to determine where we go from there.
In relation to the code of practice, which I am glad the Minister mentioned, we have just seen the Investigatory Powers (Amendment) Bill through this place. It makes some relatively minor changes to the powers of the intelligence agencies to harvest data in bulk and, to ensure the orderly passage of that Bill through both Houses of Parliament, the key excerpts of the draft code of practice were made available before Committee in either House to enable it to be properly scrutinised. We seem to have left it terribly late in the day still to be talking about a draft code of practice on this Bill, which we have not even seen. Can the Minister assure us that before we come to Report, that code of practice will be available in draft?
Indeed, I was going to come on to that later in my remarks, particularly to address the points raised by the noble Baroness, Lady Sherlock. We need the necessary time to continue to develop this code of practice, and that is particularly important in respect of this measure. The answer is no, I cannot guarantee to have the code of practice ready by Report. Indeed, I am saying that it will be ready sometime in the summer. It is important to make that point but also a further one, which is that there are many instances, as the noble Lord will know, when a code of practice is finalised and brought forward after the primary legislation is brought through, and this is one of those cases. That is not abnormal but normal. The noble Lord may not like it but there is considerable precedent for that to happen.
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I will address two particular sets of issues. The first is criteria. Paragraph 2 of new Schedule 3B explains that banks have to return information about matching accounts. As well as specifying the identity of the account holders, they have to meet certain risk criteria. The Bill, the Explanatory Memorandum and briefings always talk in terms of examples of those criteria, usually around capital limits or time abroad. But my understanding, which may be wrong—I invite the Minister to correct me if I am—is that the criteria could be anything related to eligibility for the benefits in question.
For example, the eligibility for some benefits includes being a single parent. Paragraph 2(2)(a) of new Schedule 3B says that an account information notice
“may require information relating to a person who holds a matching account even if the person does not claim a relevant benefit”.
On our last day in Committee, we established that that directly related to appointees, but that made me wonder whether it could apply to anybody else. For example, we also established that a notice could cover a joint account where one of the holders is the person to whom the benefit is paid and the other is not. Would this power allow DWP to ask banks to search for any accounts linked to any single parent and to examine those accounts for evidence that they and the other holder of a joint account might be living together? Would these powers allow DWP to devise any criteria designed to identify whether a claimant was living with another adult? To be clear, I am not asking whether it intends to do that or whether it knows how to do that. I am just asking whether it would be permissible. Is this a category of thing that it could do under the powers in the Bill?
Related to that, could DWP issue notices to a bank other than that into which the benefit is paid? Again, we have heard that the intention is to go only to the bank into which the benefit is paid, but I want to know specifically: does this Bill gives DWP the power to do that or would it need additional primary legislation to do it?
Secondly, the Bill does not say that notices can be given only to banks. It says that they can be given only to a “person of prescribed description”. The Information Commissioner said:
“I have been unable to identify where such persons are prescribed and the provision itself is silent on the matter”.
It is therefore unclear which organisations will be in scope of the power or how this will be determined. Can the Minister tell us any more about who will be covered and how that will be determined? Who could be subject to a notice? A bank or a building society could be, clearly, but could a credit union, a Christmas club savings scheme or any other financial body?
Paragraph 58 of the impact assessment on this part of the Bill says:
“This measure is drafted broadly to ensure it is future-proofed against future changes and innovation, particularly in the financial services sector, i.e. in Fintech and Crypto, and enable DWP to apply this measure to non-financial organisations in future if it is deemed appropriate and proportionate”.
Can the Minister give the Committee an example of a non-financial organisation that could be appropriate? Specifically, could this apply to, for example, phone companies? Given the open-ended nature of the powers being taken, one way for Ministers to give reassurance to both the Committee and the wider public would be to ensure that DWP is constrained by a clear and transparent code of practice over which Parliament has oversight and that it reports to Parliament on the way it is using these powers. If the Minister does not like the approach in this amendment, perhaps he could offer the Committee other forms of assurance in this area. I beg to move.
On Monday, the Minister referred to the power in Schedule 23 to the Finance Act 2011 to obtain certain data items from particular classes of data holder—for example, employers and land agents. So I had a look at that schedule and the data-gathering regulations under its paragraph 1. The power would appear to apply only to certain tightly defined items, such as payments made by the employer or arising from use of land. There would appear to be a noticeable contrast with location data, personal spending habits and so on, which fall within the scope of the powers in this schedule, as they are written in the Bill. Both HMRC and the Home Office operate under powers tightly defined in legislation. Assurances that those powers will be used in a restrained way, as Justice has commented in its useful briefing on the Bill, simply do not cut it. I am afraid that the law requires the DWP to be subject to the same constraints.
I am concerned: concerned that this important new power was not subject to detailed consultation or even to scrutiny by a Commons Bill Committee, where useful evidence could have been heard; concerned that it could even have been contemplated that so vague a power might be in the Bill and not accompanied by a code of practice; concerned about the absence of an independent approval and oversight mechanism, equivalent to the Office for Communications Data Authorisations and the Investigatory Powers Commissioner’s Office; and concerned that, if we do not get this potentially valuable power right from the start, it will immediately be subject to legal challenges, which will swiftly render it unusable.
If, as I believe, Schedule 11 is currently unfit for purpose, is there time to rescue it? I have a couple of practical suggestions. First, I saw the investigatory powers unit from the Home Office when it happened to be in the House yesterday, and I wondered if there might be utility in it comparing notes with the Bill team about these types of powers and their attendant safeguards.
Secondly, I hope the Government appreciate the significance—at least to us nerds in the Committee—of the legal analysis of Dan Squires KC and Aidan Wills. If we are to be told that it is mistaken, which would certainly be unusual, I for one would like to see that backed up by an opinion from a lawyer of equivalent stature, whether at the GLD or independent counsel, explaining precisely and persuasively why Mr Squires and Mr Wills are wrong. Otherwise, and without significant change of the type identified in the opinion, I am afraid I am not inclined to give this schedule the benefit of the doubt.
I signed up to the stand part notice of the noble Baroness, Lady Kidron, thinking it would at least be a platform to think about what amendments to the schedule might be needed. The more I read the schedule and the more I hear about it, the more I am driven to the conclusion that, if we do not see substantial change, opposing the schedule may be the way that we have to go at the next stage.
I listened very carefully to the noble Lord and will, however, take back his points and refer again to our own legal team. I think the point was made about the legality of all this. It is a very important point that he has made with all his experience, and I will take it back and reflect on it.