60A: Clause 35, page 21, line 6, leave out subsection (5).
Member’s explanatory statement
This would permit the applicant to request a review into the existence/value of the payable amount.
My Lords, our amendments in this group seek to strengthen the rights of the liable person in the review process, incorporate further consideration of the cost burden we are asking banks to shoulder and ensure that parliamentary scrutiny can be applied to any further changes the Minister makes by regulations to direct deduction orders. As has been the spirit of all our amendments, we have an ambition to work with the Government to make suggestions for improvement on the provisions they have set out. We believe that our amendments in this group are an effective way of ensuring that oversight, parliamentary accountability and collaboration with partners in the banking sector are made a firm part of the Bill, which will make it more effective in achieving our common aim.
Our Amendment 60A would leave out Clause 35(5). As noble Lords will know, Clause 35(5) as currently drafted restricts the ability of an applicant to request a review into the existence or value of the amount they are said to owe. This amendment seeks to remove that restriction and, in doing so, restore a basic principle of fairness and accountability in the administration of public funds.
It is an established principle of public law that individuals should have the right to challenge the basis of a financial demand made upon them by the state, not just how it is enforced but whether it is rightly due at all. Yet, as things stand, Clause 35(5) precludes that possibility. It denies the applicant the right to request a review of either the existence of the debt or the amount allegedly payable.
Let us consider the potential consequences of this. An individual could be told that they owe a significant sum without any meaningful opportunity to question the underlying calculation or whether the liability even exists. That is not the mark of a fair or just system. It may be argued that efficiency or administrative simplicity requires limits to review rights, but this must not come at the expense of natural justice.
My Lords, I support my noble friend Lady Finn, particularly on Amendment 60A, because as we go through this process it feels as though the Government are trying to be judge and jury on whether the existence of an order should apply at all. I am conscious that it is important that the Government be allowed to get on and have this more straightforward way of collecting money that they are due, but it strikes me as pretty draconian that the question of whether a debt exists cannot be challenged—it cannot go for review. I appreciate we are debating the amendment, but I say by the way, in reference to the Explanatory Notes for Clause 34 on the process for review, that the legislation does not point to the fact that it is supposed to go to a higher-grade person; I am sure that it will be set out in guidance, which I hope will have statutory standing. It strikes me as odd that, having not been able to even challenge whether the order should exist, you cannot go to a tribunal about it, either. Ministers will know that I wish that parts of the Bill would go further in trying to get money back from people in a variety of ways, but in this area I do not agree with the approach of the Government and certainly agree with that of my noble friend.
My Lords, I was not going to speak on this group, but, as the noble Baroness, Lady Anderson, proved the other day, Amendment 60A is not necessary because Clause 12 sets out clearly that these orders can be used only where there has been a final determination of the amount owing by the court or where it has been agreed.
However, I support Amendment 61A. Frankly, it is becoming a bit of a weakness in an awful lot of areas that the impact assessments that come with legislation are regularly quite poor. It is incredibly important that, when we make regulations that will have impacts on people, we understand what those impacts are.
I have one other question that I probably should have dealt with by means of an amendment, but I have only just spotted something. Why are regulations made under Clauses 37(2)(c) to (f) subject to the negative procedure and not the affirmative procedure?
My Lords, the amendments tabled by the noble Baroness, Lady Finn, and the noble Viscount, Lord Younger of Leckie, raise important considerations about procedural fairness and transparency in the implementation of the Bill. Amendment 60A, which would allow applicants to request a review into the existence or value of the payable amount, would provide a valuable safeguard, ensuring that individuals have an accessible means to challenge decisions where there might be uncertainty or dispute. This aligns well with the principle of natural justice and could help prevent errors going uncorrected.
Amendments 61A and 61B focus on the mechanisms surrounding direct deduction orders, emphasising the need for accountability and parliamentary oversight. Requiring an impact assessment to accompany any changes to the processing of these orders, as proposed in Amendment 61A, would encourage transparency about the potential costs and effects on banks’ operational capacity. Similarly, Amendment 61B’s provision that consultation outcomes must be laid before Parliament prior to implementation would ensure democratic scrutiny. Together, these amendments would contribute to a more open and considered approach, balancing the efficient recovery of public funds with the need for oversight and due process, and I support them.
My Lords, this has been a helpful and constructive debate. I shall just clarify some points that have been made and respond directly to some of the questions. I think I can answer them all; if not, I will reflect on Hansard.
Amendment 60A would enable the liable person to appeal against the existence and value of what they owe as a result of fraud or error as part of the appeal process for direct deduction orders. I remind noble Lords that direct deduction orders are used only if a liable person has opted not to come to the table and negotiate. This is not the first way in which we would have engaged; it is at the end of a process.
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To clarify, however, I am in agreement with the noble Lord, Lord Vaux, that this is a duplicative amendment, as Clause 12 already provides for the liable person to disagree with the amount owed, in which case the Minister will need to issue a claim to reach a determination that the amount is owed in a court or tribunal prior to any recovery action being commenced. For civil penalties, the liable person would already have had the opportunity to appeal to a court prior to recovery action being taken under Clause 14.
We believe that Amendments 61A and 61B are unfortunately duplicative. Noble Lords will have heard me speak at length already about the due regard that the Government have for the potential burden these measures will put on the banking sector and how we are working with the sector to ease the delivery of the recovery powers. We aim to create a system that can fairly and effectively recover money obtained through fraud or error and return it to the public purse. The Bill allows for further provisions to be made through regulations and, before these regulations are laid, to carry out further consultation. For regulations that impact the banking sector, the Bill already has an explicit requirement for consultation to occur, under Clause 37(5). As regulations are made, impact assessments —of what quality may be open for debate—will be included in an Explanatory Memorandum and, as is standard, will be made publicly available. As for the fact that they will be tabled in the negative, this is an effort to ensure that we do not have to clog up parliamentary time, but I am more than happy to have a conversation with the noble Lord, Lord Vaux, about what that may look like.
I shall address some of the specific points made. In answer to the noble Baroness, Lady Coffey, a higher grade is specified in Clause 66.
The noble Baroness, Lady Finn, asked why the liable person cannot challenge the amount owed in a DDO internal review or appeal. We have discussed this, but the liable person will already have had the opportunity to challenge the amount owed, either as a result of fraud or error or from the application of a penalty, in the relevant court or tribunal proceedings. We believe that this provides more than ample opportunity to challenge. While we want to let people present their positions, we do not want to allow them to excessively frustrate the recovery process and cause unwanted delay in the return of vital public funds. All review and appeal options will be clearly signposted to the liable person throughout our interactions with them.
The noble Baroness, Lady Coffey, asked how the liable person will be able to challenge what is owed. Following a PSFA investigation, the PSFA will issue the liable person with a recovery notice, which will include: the amount that is owed as a result of fraud or error and the PSFA’s reasoning behind this; provisions for how the liable person can repay the amount before proceedings are initiated; and potential future recovery action that could be taken if the liable person does not engage in voluntary repayment. The liable person will then have a minimum of 28 days to respond, either engaging in voluntary repayment, providing additional evidence or preparing for future proceedings. This makes it a fairer process for them. If the person does not agree with the amount or the reasoning, they will be able to provide additional evidence to the PSFA. The PSFA may then choose to initiate proceedings in a civil court or tribunal, so that an independent judge can assess the evidence from both sides and make a final determination on the matter. For civil penalties, the time for appealing the penalty must have passed without an appeal being brought, or any appeal against a civil penalty must have been finally determined, before recovery of the civil penalty can take place.
I hope that by outlining the process that we will be going through I have given some level of reassurance. I reassure noble Lords that every effort will be made to balance safeguarding throughout this process, making sure that appropriate and robust challenge has been incorporated into the Bill. We have done this through the prism of making sure that a vulnerability assessment is in place and that there is a balance between acting as a deterrent and regaining money that has been taken illegitimately from the public purse—so that we can retain it while also protecting individuals. The safeguarding that is in place, if it were to be utilised fully at every stop, could mean that this process would take up to two years before we started regaining any of the funds. The safeguards are there for a reason: we need to make sure that the balance is also there. I hope that this explanation reassures the noble Baroness, Lady Finn, and that she will therefore withdraw her amendment.
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In matters of financial liability, particularly when imposed by the state, a person must surely be entitled to ask, “Is this right? Is this fair? Can I see how this was calculated?” This amendment simply ensures that the door is not closed on those reasonable questions. Moreover, transparency and accountability benefit not only the individual but the public authority itself. The ability to request a review can act as a safeguard against error, build public trust and ensure that determinations are robust and evidence-based. It supports better administration, not weaker enforcement.
To summarise, this amendment does not seek to open the floodgates to frivolous challenges. It simply allows a person the right to question whether a debt exists and whether the amount is correct—rights that are fundamental in any fair system. I urge the Minister and noble colleagues to support this modest but important change.
Our Amendment 61A seeks to add proposed new subsection (2A) to Clause 37. The amendment is straightforward, modest in scope but essential in purpose. It would require that any regulations made by the Minister under subsections (1) and (2) which relate to the operation of direct deduction orders be accompanied by an impact assessment. This assessment would focus specifically on the projected cost and the operational capacity of the banks tasked with implementing these orders, and would require that this assessment be laid before Parliament.
The rationale for this amendment is simple: regulatory clarity, economic realism and operational accountability. When these powers are exercised through regulations, it is vital that that is done with clear regard for the third-party organisations that will be shouldering the cost. Banks and financial institutions play a crucial role in the administration of direct deduction orders, acting as the operational arm of the enforcement process. They must identify accounts, verify balances, execute deductions and respond to any errors or disputes. These are not trivial tasks. They involve significant back-office effort, compliance oversight, system changes and, crucially, legal liability.
I and noble Lords across the Committee made our thoughts and concerns on this matter clear at the previous Committee day earlier this week, although I should reiterate that we are asking banks to dedicate serious resources to undertake functions on behalf of the public sector. If we are asking banks to do this, we must commit to working with them, not despite them. Yet, under the current drafting of Clause 37, the Government are empowered to make potentially significant changes to the rules around these orders without any obligation to assess or disclose the impact those changes may have on the very institutions expected to carry them out. This amendment does not block those powers; it merely introduces a duty to consider and explain the consequences. In doing so, it reflects good regulatory practice and ensures Parliament can properly scrutinise whether such changes are proportionate, practical and economically viable.
Let us remember that unintended consequences are often the product of insufficient consultation and opaque regulation. Requiring an impact assessment is not burdensome red tape; it is a basic tool of sound policy-making. It gives banks the foresight they need to prepare and adapt their systems responsibly, and it gives Parliament and the public confidence that the Government have weighed the risks and costs before acting. To summarise, Amendment 61A is not about resisting enforcement or shielding account holders. It is about ensuring that the infrastructure behind enforcement is fit for purpose, and that the decisions taken in Whitehall do not create avoidable burdens in the banking system, which could ultimately impact consumers as well.
Finally, our Amendment 61B proposes the insertion of a new subsection (6A), requiring that the outcome of the consultations carried out under subsection (6) be laid before Parliament prior to the coming into force of any regulations made under Clause 37. This amendment seeks to strengthen parliamentary oversight and transparency in the regulatory process. Currently, Clause 37 allows for regulations to be made following consultation but does not explicitly require that the results or finding of those consultations be presented to Parliament before the regulations take effect. This risks creating a situation whereby Parliament and, by extension, the public have limited visibility into the views expressed by stakeholders during consultation and how those views have influenced the final regulatory decisions. The amendment would ensure that Parliament is fully informed of the consultation outcomes before regulations are implemented.
This is vital for several reasons. First, it supports the principle of accountability. Parliament should have the opportunity to scrutinise not only the content of new regulations but the process by which they were developed, including the concerns, evidence and recommendations raised by those consulted. Secondly, it promotes transparency. Stakeholders, including financial institutions, consumers and civil society, can see how their input has been considered and can hold the Government to account if the consultation appears to have been perfunctory or to have ignored key issues. Thirdly, this measure will encourage better-quality consultations by ensuring that the Government give proper weight to responses before finalising regulations. In short, this amendment is a commonsense safeguard to enhance democratic oversight, improve policy-making and build trust in the regulatory process concerning these important financial regulations.
These amendments collectively serve to reinforce fairness, transparency and accountability at every stage of the process, from ensuring individuals have the fundamental right to challenge financial liabilities to safeguarding that banks are neither overburdened nor overlooked, and guarantee that Parliament exercises proper scrutiny over any regulatory changes. The amendments embody a commitment to responsible governance and collaboration with all parties involved and improve the Bill’s effectiveness in delivering its goals while protecting the rights of those affected. I respectfully urge all noble Lords to support these sensible and necessary amendments so that this legislation can proceed, strengthened by clarity, oversight and justice. I beg to move.