Baroness Finn (Con)

I apologise to your Lordships. The Committee will be fed up with hearing from me before the afternoon is out. No? Excellent. We all agree that fraud against the public purse is wrong and must be tackled, but we must also be honest about who is being asked to do the work and at what cost. Banks are expected under the provisions in the Bill to dedicate staff, systems and time to support public sector fraud investigations or enforcement efforts. This may be in the form of complying with information notices, processing and applying deduction orders, or liaising with government departments. These activities are not core business functions for a commercial bank. They are not revenue generating. They do not serve the bank’s shareholders or contribute directly to its customers’ financial well-being. They are, in essence, a form of public service being performed by a private entity. Here is the crux of the matter: every hour a member of the bank staff spends assisting with a public fraud case is an hour that they are not spending on risk management, product development, client service or revenue generation. That is a real and measurable opportunity cost: the bank is being asked to sacrifice its own commercial objectives to achieve a government policy goal. Regardless of the fact that this is a goal with which we all agree, we need to recognise that this is a burden on banks, even if it is in pursuit of a good objective. Of course, banks have legal and moral obligations to help prevent criminal activity—and they do. However, we must be cautious about crossing the line between reasonable regulatory compliance and the outsourcing of state enforcement functions to private firms, without proper consideration of the attendant costs and effects that this could have. It is also worth considering the cumulative effect. Banks are not only being asked to support fraud detection but simultaneously are dealing with sanctions enforcement and a growing raft of compliance burdens. The more we demand of banks in public service roles, the more we divert their resources away from their essential commercial purpose: financing the economy. So, while the fight against public sector fraud is essential, we must be alive to the costs that we are placing on others to carry it out. Our Amendments 32, 38 and 54 would demand that the Minister has due regard to the costs that they are imposing on banks as a result of the exercise of their powers. We return to our core theme of proportionality: building into the Bill a regard to the cost burden on banks is a way that the imperative of tackling fraud is sensibly and responsibly balanced with the attendant costs that it imposes on private entities. Further to this, our Amendment 33 would require the Minister to undertake a review of the costs being imposed on banks within 12 months of Clause 19 coming into effect. This amendment works alongside our Amendments 32, 38 and 54 in establishing the principle that the Minister must have due regard to the costs imposed on banks, and furthers this by demanding that the Minister undertakes a review of these costs a year after the provisions in the Bill come into force. In creating a duty to have due regard and combining it with the requirement for a review after a year, we have proposed sensible amendments which impose on the Minister an important obligation to the banks on which the Bill so heavily relies. We must make sure that, in our efforts to tackle fraud, we work alongside partners in the banking and financial sectors, not against them. These amendments will ensure that the Bill does that. Finally, our Amendment 40 would ensure that the relevant bank is involved in determining the amount of money that it could recover to cover the costs incurred by complying with the demands under the Bill. At present, the Minister is able to unilaterally determine what a bank’s reasonable costs are. As I have outlined in my remarks, in complying with the Bill banks will incur not just an operational cost but an opportunity cost. Banks understand the complexity of their own systems; they know what it takes to divert staff from commercial roles to public service tasks. They are best placed to quantify the impact of compliance on customer service, internal risk management and technical infrastructure. To exclude them from this process of determining costs, to impose obligations without consultation or a mechanism for cost recovery, would be to create an asymmetric relationship in which the state demands and the private sector simply absorbs. We are not asking for a blank cheque or for banks to name any figure they please, but there must be a structured and collaborative process, grounded in evidence, in which banks have a say in what their involvement truly costs and in how those costs are acknowledged and, where appropriate, reimbursed. This is therefore a sensible amendment which seeks to create that relationship between the Cabinet Office and the banks on which it relies. I hope the Government will consider it as a reasoned improvement to the Bill. In conclusion, it is important that we do not overlook the practical realities of who is being asked to shoulder the burden of implementation. The provisions in this Bill place real and ongoing demands on the banking sector—not only in staffing and systems but in opportunity costs that affect banks’ ability to serve customers and grow the wider economy. Our amendments do not seek to weaken the fight against fraud but to ground it in a framework of fairness, partnership and proportionality. By requiring that Ministers have due regard for the costs imposed, that those costs are reviewed and that banks have a say in assessing what they are owed, we introduce essential balance and accountability into this regime. These are moderate, practical and constructive proposals. If we are to maintain the willing co-operation of the banking sector in delivering the public good, we must also treat banks as genuine partners, not simply as instruments of policy. I hope the Government will take these amendments seriously, and I urge noble Lords to support them. I beg to move.