Baroness Anderson of Stoke-on-Trent (Lab)

My Lords, tackling public sector fraud is a foremost priority for this Government. Amendment 68D raises interesting points. It seeks to put some of the work that the PSFA does with departments and public bodies to improve their management of fraud on a statutory basis, and to explicitly have it cover all government schemes or programmes over £100 million. While we have been debating the fraud investigation activities of the Public Sector Fraud Authority, for which we believe there is a very strong case, we have understandably not given as much time to the wider responsibilities the PSFA already holds, as detailed in its published mandate—which is wonderful bedtime reading, as per my theme; I like to give bedtime reading on each day in Committee. This is not part of the Bill, but it might be useful for noble Lords if I spend a moment to update the Committee on the other work of the PSFA. The PSFA works with departments to improve their understanding of fraud and to improve their action on the risk of fraud through a range of modern techniques. Fraud investigation is, of course, only one part of this. Alongside this, public bodies need effective capabilities to understand and reduce the risk of fraud, through tools such as fraud risk assessment and fraud measurement, which this proposed amendment covers, and also through intelligence, fraud prevention, deterrence, process design, the use of data and analytics, fraud detection and the shaping of an organisation’s culture. I would like to set out some key principles around how the Government approach fraud risk. Accounting officers within departments are responsible for managing public sector organisations’ risks, including fraud. Each organisation faces a range of fraud risks specific to its business, from internal and external sources. Managing Public Money—also a fascinating read—already sets out that, for any new major area of spend with high fraud risk, departments shall assess the risk of and impact from fraud at the outset. This identifies the potential for fraud and the different impacts that fraud could have for the spend area. In high-risk areas, once spending is approved, this results in the development and continued maintenance of a detailed fraud risk assessment. High-risk areas would be the highest areas of government spending where fraud measurements are not yet in place and which have been identified as high risk by a mandatory initial fraud risk assessment process. The PSFA was introduced with a published mandate that openly sets out how it will work with departments and public bodies and what is expected of all parties. Government departments and public bodies must comply with this mandate. The mandate sets out that public bodies must use initial fraud impact assessments, in line with Managing Public Money, submit quarterly data returns on the levels of fraud and error they find and report on their progress against their action plans and key metrics. Departments and public bodies are also required to ensure that they adhere to the counterfraud functional standard. This is independently assured by the Public Sector Fraud Authority on a rolling basis. The functional standard outlines the expectations for managing counterfraud, bribery and corruption activity. It clarifies the basics that public bodies should have in place, promoting efficient, coherent and consistent management across the public sector. The PSFA’s published mandate enables it to conduct expert reviews on public bodies’ fraud work. To date, the PSFA has reviewed 31 public bodies against the counterfraud functional standard. The PSFA’s mandate also requires it to publish a report on fraud across government annually. This includes the levels of detected fraud and corruption and associated error in departments and public bodies—excluding tax and welfare, as these are published elsewhere. Fraud measurement exercises are used as a tool to understand fraud risk in the highest areas of loss. The Government have also created a high fraud risk portfolio, in line with the PSFA’s mandate, that details the highest risk areas of government spending where there are not yet fraud measurements in place. The Government decided that schemes on this portfolio should undertake fraud measurement exercises and report these to the centre. This is currently being tested with the current schemes on the portfolio, where it is operating on a “comply or explain” model, enabling us to assess the burden and impact of this approach. The PSFA will continue encouraging and supporting departments to do more targeted measurement. Just last year, the government counterfraud profession launched its first qualification for fraud measurement practitioners. The amendment also recommends that all the findings are reported to the National Audit Office, in the form of the Comptroller and Auditor General. The PSFA’s mandate already enables the PSFA and the NAO to work very closely to share information on public body performance in dealing with fraud: “The PSFA will openly and regularly update on its activities and the data it holds to the National Audit Office (NAO). This will include performance data and the compliance with mandatory processes and data requests”. In addition, this is an area that the Public Accounts Committee has paid keen attention to, and the PSFA has committed to share the high fraud risk portfolio with the committee on reading-room terms. I hope that the collective measures I have outlined reassure noble Lords that the Amendment 68D would serve only to replicate responsibilities and duties that already exist and that the noble Baroness will therefore withdraw the amendment.