Lord Davies of Brixton (Lab)

My Amendments 109A and 109B address the twin issues of affordability and minimising social harm. Amendment 109A deals with the Government’s proposed “affordability assessment”, which is my term, not the Government’s. Amendment 109B requires a de minimis amount to be left in an individual’s bank account following the application of a deduction order. Neither amendment breaks new ground and both are within the terms of government policy. If we are going to pursue this policy, it has to be transparently fair and minimise social harm, which is the purpose of my amendments. It needs to be stressed that both amendments are strongly supported by UK Finance, which is the collective voice for the banking and finance industry. These are the people who will have to undertake the hard work of implementing this policy, so their views should be taken seriously. I am not a natural proponent of UK Finance—I have spent much of my working life criticising insurance companies and banks for how they treat people—but it is a relevant participant in this process and its views should be taken most seriously. On Amendment 109A, as I mentioned, there will be an affordability assessment. It is pretty well hidden—there is no reference to it in the Bill—but paragraph 52 of the Explanatory Notes states that direct recoveries “will only happen once affordability and vulnerability checks have been carried out”, so there will be checks. There is a more explicit reference in paragraph 723, which states specifically that “prior to pursuing a direct deduction order”, the Secretary of State will consider “the affordability of recovery”. That affordability assessment is an inherent part of the legislation, even though it is only implied in the Bill rather than required explicitly. My amendment is a probing amendment to press the Government on whether it would be better to have this in the Bill. To paraphrase the Government’s position as I understand it, recovering benefit overpayments through the debt recovery measure will be a last resort and the Minister may make a direct deduction order only if satisfied that it will not cause a liable person to suffer hardship. Maybe the Minister could put the intention of the legislation into the Government’s words. UK Finance has said that it welcomes this intent but is concerned that the existing safeguards may not provide the level of protection that vulnerable consumers need in practice. Perhaps it knows its customers better than we do. For this measure to be effective, an affordability assessment is essential: one that is carried out by the DWP and is accurate and realistic. I understand that the DWP is working with the Money and Pensions Service to flesh out the detail of the process. It is obviously essential that the DWP can understand the circumstances of vulnerable customers to ensure that the affordability assessment is fair and will not lead to social harm. We know that organisations such as the Money and Mental Health Policy Institute—I declare an interest as a member of its advisory panel—the Money Advice Trust and Citizens Advice have been campaigning for some years for improvements in government debt practices. This is not a new problem. I mentioned in the previous sitting the comments made by the House of Commons Public Accounts Committee, but it is relevant to repeat them. It said that the DWP “does not understand well enough the experience of vulnerable customers and customers with additional or complex needs … We remain concerned about the potential negative impact on protected groups and vulnerable customers of DWP’s use of machine learning to identify potential fraud”. This goes back to an earlier debate but it highlights that the evidence to hand is that the DWP is not very good at assessing affordability. It is reasonable, by means of proposing this amendment, for the Government to explain how the affordability will be assessed. If the proposals do not appear to be adequate, I will want to return to this issue on Report. Similarly, Amendment 109B is a probing amendment. It lacks much of the detail that a specific proposal would need but proposes that there should be a de minimis amount left in an individual’s account following the application of a deduction order. The intention is that individuals should not be left without access to essential funds and should not suffer undue hardship. This is not a new proposal because there are other circumstances in which debts owed to the Government, where the Government have powers to extract money from people’s bank accounts, permit a de minimis amount. There are the comparable HMRC direct recovery of debt measures where there is a de minimis balance of £5,000. There is a similar arrangement in Scotland. Scottish law is a mystery to me, but there is a parallel arrangement under Scottish law that, in circumstances where debts can be taken, they have to leave at least £1,000. The problem arises—talking about both sorts of deduction orders—that there is a possibility of extracting money and leaving the individual with no income whatever to meet routine payments such as rent. Because the bank account is frozen, they may also have made prior commitments and, when those arise and these private arrangements seek money from the bank account which has been driven down to zero by the deduction order, the individual is left in an extremely difficult situation as debts that they have incurred are not able to be met. There is also the issue of money for routine costs. If someone depends on their bank account to feed their family and the account is driven down to zero, that will also incur considerable and unwarranted hardship. It is quite clear that, following existing practice, this legislation should permit a de minimis amount to allow routine financial transactions to continue where barring them would cause social harm. There is a particular problem that, once the 28-day period has been triggered during which people can object to the proposed deduction order, the account is effectively frozen. In fact, it is frozen until the end of the unlimited period the DWP has in order to reply to the appeal against the deduction order. There is potential for considerable social harm and that is why it is important that at least some agreed sum of money is left. I suggest £1,000 in my amendment but I am really raising the issue in principle. If the Government can come back on Report with a proposal along the lines I suggest, that would be good. If they do not, I will seek to raise this issue. Both these amendments seek to avoid social harm, and I hope the Government will take the points on board and come back on Report with suitable amendments to avoid the problems identified, not just by me but by bodies in membership of UK Finance which deal with the customers who will be caught by these provisions.