Lord Vaux of Harrowden (CB)

My Lords, I hope that my Amendments 81, 89C and 91 are fairly self-explanatory and that we are getting into more detailed points, which might be easier, rather than points of philosophy. Amendment 81 relates to the costs that the eligibility verification process will impose on the banks and other financial institutions that must respond to the notices. It is intended to probe how those costs will be treated. We have already had various debates on third-party costs at earlier stages in Grand Committee, but in relation to the DWP clauses around eligibility verification, there is an important difference, which is that, so far, the Government have not made any real attempts to quantify the impact that the EVM process will have on the banks or other financial institutions. The impact assessment says about the EVM: “The cost to Data holders has not been estimated at this stage; estimates will be included in a subsequent IA”. It goes on to give a bit more detail of the impact on third parties, banks and institutions, saying: “There will be transition costs and on-going costs for businesses. The impact assessment outlines some indicative costs to business, however at this stage we are unable to provide a robust assessment of business costs for validation. This is because the operational solution for the measure is currently being developed, alongside further engagement with banks. We have committed to work in partnership with banks to develop the most appropriate implementation route. Estimates will be included in a subsequent IA”. Later, the IA refers to set-up costs to banks of around £41.25 million, although that is not based on any substantive evidence. The Bill itself is entirely silent on the costs of the eligibility verification regime to banks and other financial institutions, and how they might be treated. As we have discussed, this is not about the impact on the banks alone; it is also about the possibility of the unintended consequence of making banks less willing to provide services to benefit claimants. We had a long debate on that previously, and I shall not repeat the arguments. Amendment 81 would require the Secretary of State to satisfy themselves that the costs to the banks will be proportionate and reasonable or, where that is not the case, to agree to repay some or all of the costs to the banks. This is not a situation where the costs can be recovered from the fraudster, because there may be no fraudster. The banks will, effectively, be working for the Government in this case, so it is appropriate that the Government should cover any unreasonable costs. Amendment 91 also looks at the costs of the EVN regime. It would add to the scope of the annual independent review—as an aside I very much welcome that independent review; it is a big step forward in the safeguards around this—so that it would now also report on whether the use of EVNs has been proportionate to the costs incurred both by the department and by third parties such as banks. As I have said, there has been no meaningful attempt yet to evaluate the costs to third parties, particularly because the work is ongoing to work out what those will be, so there must be some mechanism to ensure that the costs are proportionate, and the independent review would be the logical and sensible place to do that. Amendment 89C is more technical; it is designed to deal with a concern raised with me and others by UK Finance. This concern is that the existence of an eligibility indicator might constitute grounds to suspect fraud and therefore impose obligations on the bank to take actions such as closing or freezing the account or issuing a suspicious activity report under the various obligations that the banks already have. It is worth hearing what the impact assessment has to say in this respect. It says: “In discussion with the banking sector, the Department has been clear that any data received under this measure should not be seen as indicative of any financial crime. Many claimants will have a legitimate, authorised reason to hold savings in excess of capital benefit rules (disregards for injury compensation, for example) and in many cases, overpayments could have been caused by genuine claimant error. Given this, the Department has been clear that there should be no action to risk claimant bank accounts because of the measure”. So that sounds good. Part 2 of Schedule 3 already goes some way towards this, but UK Finance has made it clear that it does not see the existing wording in Part 2 of Schedule 3 as adequate, as it covers only the suspicious activity report element. UK Finance agrees that there has been extensive engagement with DWP on this but makes the point that, despite this engagement, there is currently no agreed deconfliction on banks’ financial crime obligations. The amendment simply says that information that results from a EVN should not be treated in that way, and should not of itself be treated by the bank as grounds to suspect fraud. The “of itself” is important there. I will be interested to hear what the Minister has to say, given the industry’s remaining concerns. Why does she disagree with UK Finance on this? An alternative way of dealing with this concern would be to ensure clear guidance from the FCA, which does not seem to be happening. Why are the Government not simply pressing the FCA for such guidance? Amendment 83, tabled by the noble Lord, Lord Davies of Brixton, does something similar, with reference to conflicts between the Bill and the duty of care that banks owe to their customers, and I look forward to hearing what he has to say in that respect. I beg to move.