Consultation outcome

Government response to the consultation on the Public Sector Fraud Authority's (PSFA) Civil Penalty Powers: Code of Practice

Updated 27 May 2026

Foreword

Fraud against the public sector is not a victimless crime; it diverts vital funds away from the public services we all rely on, erodes trust in government, and leaves the taxpayer footing the bill. In the social security system alone, estimates show that overall overpayments due to fraud and error recently stood at nearly £10 billion a year, contributing to the tens of billions overpaid since the pandemic. Addressing this challenge required a modernised, robust, and resolute legislative response.

The Government introduced the Public Authorities (Fraud, Error and Recovery) (PAFER) Bill to Parliament on 22 January 2025. Following rigorous debate and detailed scrutiny through both the House of Commons and the House of Lords, the Bill successfully completed its parliamentary passage on 11 November 2025, receiving Royal Assent shortly thereafter to become the PAFER Act 2025. 

This landmark legislation represents the most significant reform in the last decade to identify, prevent, and deter fraud across the public sector, while enabling the fairer and more effective recovery of debt owed to the taxpayer.

A central pillar of the PAFER Act is the introduction of new powers to issue civil penalties. Historically, the primary route for punishing fraud has been through criminal prosecution. While criminal proceedings remain essential for the most egregious and organised offences, they are highly resource intensive, lengthy, and can sometimes be a disproportionate response to certain levels of fraud.

By introducing civil penalties, the Act provides the Public Sector Fraud Authority (PSFA) with a more agile, proportionate, and cost effective enforcement mechanism. Relying on the civil standard of proof (the balance of probabilities), these penalties ensure that those who defraud the public purse face tangible financial consequences and are stripped of any illicit benefit, without placing unnecessary strain on the criminal justice system. It allows us to resolve cases faster and return recovered funds to frontline services more efficiently.

However, we recognise that with these new powers comes the responsibility to use them fairly, transparently, and proportionately. That is why the statutory requirement to publicly consult on the Civil Penalty Code of Practice was embedded in the Act. The consultation, which closed on 27 February 2026, provided a valuable opportunity to hear from industry experts, financial institutions, third party organisations and the public.

This document sets out our response to that consultation. It outlines how we have carefully considered the responses received, particularly regarding safeguards for vulnerable individuals, procedural clarity and how we are updating the Code of Practice to ensure it strikes the right balance between robust enforcement and rigorous procedural fairness.

1. Introduction

1.1. This document analyses the key feedback received from stakeholders during the public consultation on the draft PSFA Civil Penalties Code of Practice (closed 27 February 2026).

1.2. The consultation received six responses from a variety of stakeholders, of the six, one  was from UK finance that consists of the major financial institutions, debt advice charities, consumer protection organisations and the public.

2. Questions which did not receive comments

The following Consultation questions received no comments: 

Q1. Does the introduction provide enough information to understand why a code of practice is being proposed?

Q2a. Are the procedural rights clear?

Q2b. Is there anything else you would expect this section to include?

Q3. From reading this section of the Code, are you clear on the levels of oversight related to civil penalties, and is the process set out in this section adequate?

Q4a. Do you agree that this section provides enough detail to understand the scope of the Code?

Q4b. Is there anything else you would expect to see to help understand the scope of the legislation, and is the process set out by this section adequate?

Q5b. Is the process on how cases are referred to PSFA adequate and clear to you?

Q5d. Does this section require further information to understand the case assessment approach?

Q6. Is there any information missing from this section that you would expect, and is the process set out by this section adequate?

Q11. Is the Code of Practice clear and concise on when penalties will not be applied?

Q12. The PSFA may reduce the level of penalty. This is dependent on the individual/organisation being fully co-operative with an investigation into their fraudulent behaviour subject to full disclosure of the facts. Is the Code of Practice clear on how this process will work?

Q13. Does the Code of Practice provide adequate information to help you understand why and how Penalties for non-compliance are issued?

Q14a. Does this section sufficiently detail the safeguards and processes in place in event of an error?

Q15a. Is how to make a payment clear enough?

Q17. Are you satisfied that this section explains the safeguards and processes around overpayments?

Q19. Is there anything missing from this section that you think we should include?

3. Areas of the Code of Practice which have been changed as result of this consultation.

3.1. These comments focus on operational procedure, definitions, and clarifying ambiguities in the current draft. They do not alter the underlying PAFER Act powers.

Procedural Escalation & Dispute Criteria (Code Sections 5.2 & 9.1 / PAFER Act: “Right to Internal Review” and “Escalation of Disputed Decisions”)

Consultation Question: Q5a. Are the roles of Authorised Officer, and Senior Authorised Officer clear to you?

Consultation Question: Q9. Is the process on how an internal review of a civil penalty decision is taken clear enough to you?

3.2. Some respondents said that Section 5.2 (“Review of decisions by the Senior Authorised Officer”) did not explain the procedural steps if a Senior Authorised Officer disagrees with an Authorised Officer’s initial culpability decision. Additionally, Section 9.1 (“Internal Review Mechanisms”) lacks criteria on when an internal review is handled by a senior officer versus when it is escalated to a Minister.

What we have done

3.3. We have amended section 5.2 of the Code of  Practice to make clear that all reviews upon request will be carried out by a Senior Authorised Officer (meaning an Officer of a higher grade) to that of the original authorising officer, and have included some of the considerations they may take into account and the decisions they may come to as a result of the review.

We have added an explanation to section 9.1 of the Minister’s delegation of reviews to Senior Authorised Officers, while retaining the ability to undertake them personally. 

Statutory Timeframes (Code Sections 8.2, 8.3 & 16.1 / PAFER Act: “Time limits for statutory representations and payment”)

Consultation Question: Q8. Overall, do you find this section on representations relating to civil penalties clear and easy to understand?

3.4. Some respondents noted an apparent contradiction regarding when the 28 day periods for notifications begin. Section 8.2 (“Time limits for making representations”) states the period begins the “day after” the notice is given, while Section 8.3 (“Commencement of the representation period”) implies it begins on the “day of.”

Our response

3.5. This was a drafting error in the document.

What we have done

3.6. The Cabinet Office has now updated the code of practice to say “beginning with the day after the day on which the notice is  given” throughout. This reflects accurately the language of PAFER 2025.

Defining “Hardship” and “Reasonable Estimates” (Code Sections 7.2 & 16.1 / PAFER Act: “Calculation of penalty and recovery of debt”)

Consultation Question: Q16a. When a penalty goes unpaid, the penalty incurs additional charges, such as interest. Is this process made clear, and is the process set out by this section adequate?

3.7. Some respondents urged the PSFA to explicitly define “hardship” within Section 16.1 (“Consideration of hardship during debt recovery”) and align it with existing cross government debt recovery guidance. Some respondents commented that Section 7.2 (“Calculating the estimate of loss or benefit”) should clarify that any estimates generated by the PSFA must be “reasonable.”

What we have done

3.8 The Code at paragraph 16.2 has been updated to include a definition of hardship for the purposes of civil recovery. We have added the term “reasonable” to section 7.2.

Acceptance of Late Representations (Code Section 8.2 / PAFER Act: “Extension of representation period”)

Consultation Question: Q8. Overall, do you find this section on representations relating to civil penalties clear and easy to understand?

3.9. Some respondents requested an amendment to Section 8.2 (which currently states the PSFA will “not normally accept late representations”) to explicitly allow them if the]re is “good cause,” providing nonexhaustive examples of what might constitute such cause.

What we have done

3.10. We have amended section 8.2 in line with this suggestion. Providing exceptions for “good cause” aligns with the flexibility permitted under the Act, affords necessary operational flexibility, and protects vulnerable individuals without altering statutory rights.

4. Areas of the Code of Practice which have not been changed as a result of this consultation

Financial “Means” in Penalty Calculations (Code Section 7.3 / PAFER Act Section 53: “Determination of penalty amounts and mitigation”)

Consultation Question: Q7b. Does this section of the Code explain clearly how a civil penalty is calculated?

4.1. Several respondents strongly urged that an offender’s financial “means” (their ability to pay) be explicitly mandated in Section 7.3 (“Factors determining the proportionality of the penalty”) as a central factor in calculating the final penalty level, similar to the approach taken with criminal fines.

Our response

4.2. Penalties are redress for wrongdoing, and as such the calculation of a penalty is based on the facts of the case. Ability to pay is not a factor in the penalty calculation. The financial position of an individual or company will be considered when PSFA considers its approach to collection of penalties or use of its debt recovery powers.   

What we have done

4.3. We have not amended the Code of Practice in response to this suggestion. 

Explicitly listing Economic Abuse & Coercive Control (Code Sections 5.4, 5.5, 7.4 / PAFER Act: “Statutory considerations for vulnerable persons”)

Consultation Question: Q5c. Do you think the code of practice provides enough information to understand PSFA’s approach to Vulnerability?

4.4. Some respondents commented that economic abuse and coercive control should be explicitly named in Section 5.4.

Our response

4.5. The Code of Practice already signposts to the GDMF Economic Abuse Toolkit, which covers these issues in detail. As PSFA will follow the best practice in this area, we do not believe we need to duplicate the existing language of the toolkit.

What we have done

We have not amended the Code of Practice in response to this suggestion.

Information Retention & Ringfencing (Code Section 18.1 / PAFER Act: “Safeguards for information gathering and retention”)

Consultation Question: Q18. Is there anything further in this section that you believe we should include?

4.6. Stakeholders commented that Section 18.1 (“Retention and use of information obtained under PAFER powers”) should be expanded to explicitly detail how gathered information will be retained, ringfenced, and used for civil versus potential criminal purposes.

Our Response

Detailed guidance on how information is securely retained, ringfenced, and processed is already set out in our published privacy policies. You can find full details regarding our data protection compliance by referring directly to the Privacy Notice for the PSFA Enforcement Unit. This document is updated from time to time. 

What we have done

4.7. We have not amended the Code of Practice in response to this suggestion.

Mandatory Independent Third Party Support Panels

Consultation Question:  Q20. Is there anything which you think is missing from the Code or which requires further detail?

4.8. A respondent commented that the Code should establish a “trusted panel of independent organisations authorised to help people with benefit applications and compliance processes,” including mandatory referrals to independent debt advice.

Our response

4.9. The Code of Practice sets out how we will use Civil Penalty powers under PAFER, not the commissioning or funding of external advisory panels. Mandating third party involvement in the statutory investigation process goes beyond the Code’s scope.

What we have done

We have not amended the Code of Practice in response to this suggestion.

Automatic Redress Systems

Consultation Question: Q10. Is the process for imposing a penalty, making representations, internal reviews and appeals adequate from what is set out in this Code of Practice?

4.10. Some respondents suggested that an “automatic redress” system should be established where, if penalties are found to be incorrect, deductions are cancelled and non-compliance penalties are removed instantly without the need for formal appeal.

Our response

4.11. The PAFER Act already sets out formal representations, internal review, and tribunal process. This includes points at which, if a decision to impose a penalty or a level of penalty is disagreed, the penalty will be cancelled.

What we have done

We have not amended the Code of Practice in response to this suggestion.

Overriding the Civil Standard of Proof

Consultation Question: Q7a. Do you find this section on how a civil penalty is established easy to understand? Is the information clear and adequate?

4.12. Various respondents expressed concern over the “balance of probabilities” (the civil standard of proof) being used, commenting that it increases the risk of penalising genuine errors compared to the criminal standard (“beyond reasonable doubt”).

Our response

4.13. The civil standard of proof serves as the legal foundation for the civil penalty powers conferred by Parliament under the PAFER Act . The Code of Practice is operational guidance and cannot alter the primary legislation to require a higher standard of proof. The balance of probabilities is the standard currently used in civil fraud cases (i.e. if one party sues another for redress of fraud).

What we have done

We have not amended the Code of Practice in response to this suggestion.

If you need a version of this document in a more accessible format, please email psfa-exco@cabinetoffice.gov.uk. Please tell us what format you need. It will help us if you say what assistive technology you use.