Contribution
My Lords, our amendments in group 4 are designed to improve the system of debt recovery that the Bill seeks to establish to make sure that adequate protections are given to the liable person, and that the Cabinet Office is held to a high standard in the exercise of the powers it is being granted. It is essential that we recover debt and combat fraud—I think that we are all agreed on that—but we must remember that in this Bill we are creating a system that will engage with and be run by real people. In these amendments we seek to tease out the practical problems that those real people might come up against while using this system. As we have heard, real people might well have messy lives. We have identified several potential such problems, and in this group we want to flag them to the Government so that they can make any changes needed.
Our Amendment 28 seeks to clarify the standards used by the Minister when determining whether or not they should make a direct deduction order to a joint account. The decision to make a deductions order from a joint account is a serious one, as it directly affects a person who is not liable, unless in cases which fall under Clause 18(3). The Minister must therefore be clear that certain conditions have been met before such a decision is taken, so that those who hold a joint account with the liable person are adequately protected from such an order.
The formula outlined in Clause 20(2) is a blunt tool, which we feel will struggle to operate fairly and effectively in practical terms. The formula assumes that the liable person’s interest in a joint account is of a fixed proportion, meaning that if there are two people holding a joint account, the Government will assume that 50% of the funds in that account relate to the liable person.
This has some obvious pitfalls, not least that, upon being informed that they are subject to a direct deduction order, the other account holder could move most of their assets out of the joint account, into a separate one. Say two people had a joint account with a balance of £50,000, split evenly between the account holders. Upon being informed that they were subject to a direct deduction order, the non-liable person could remove £24,999 of their funds into a separate account, leaving £25,001 in the joint account. Under the mechanism provided for in the Bill, the Government are to assume that 50% of these funds regardless belong to the non-liable person.
This mechanism risks creating an obvious loophole, in which the liable person, could, in essence, protect 50% of their assets by keeping them in a joint account. Conversely, the formula could have the reverse effect of penalising the non-liable person, if that person is due more than 50% of the assets in the joint account.
While the Minister is required under Clause 18(1) to assess the liable person’s beneficial interest, there is no requirement that they apply the deduction order to reflect this. Indeed, the Minister “must” presume that the liable person’s interest is proportionate, in line with this formula.
Our amendment makes it clear that the use of the formula to work out a liable person’s beneficial interest must only be a last resort. The Minister must make a proper assessment of the liable person’s beneficial interest before they resort to using the mechanism in Clause 20(2), which has many attendant problems, some of which I have highlighted.
Our Amendment 34 seeks to tie the Cabinet Office to a duty to provide notices to all other relevant persons within seven working days. At present the requirement is that the Cabinet Office undertakes this duty within a time period that it can itself determine. While the recovery of funds is of course right, we must consider the impact that this will have on the liable person. Indeed, it is highly likely that a deduction order will affect not only the liable person but other third parties who are not directly involved. For a person with a joint account, this will be the case.
The Cabinet Office is responsible for ensuring that the liable person and other third parties affected by a direct deduction order are informed of the fact as soon as possible. The Bill currently states that the notice must be given to the liable person
“as soon as reasonably practicable”,
but we believe that the Government should comply with this duty within seven days. Allowing this period to be determined by the Cabinet Office itself is not a secure guarantee, and the liable person should have a right to be informed of this fact within an explicit timeframe, both for their benefit and that of affected third parties.