Checked iCloud storage => plenty of space available
Checked iPad storage => plenty of space available
Checked 3rd party apps trying to use iCloud as backup => no apps were doing this
I contacted Apple Support.
The screen prompt was in fact for my iPad passcode. It was being caused by the 3rd party app iMazing on my Mac which is used to perform local backups via the LAN (device to Mac). I contacted iMazing support who confirmed that 'this is a new security feature introduced in iOS 16.1 and iOS 15.7.1 that is designed to prevent unauthorized access to the device, mainly through Wi-Fi backups on trusted computers. The same prompt happens when backing up the device via Finder or iTunes.'
They also confirmed that 'this feature can't be turned off at the moment by Apple design but, hopefully, Apple will add a switch for it in the future. You can send the feature request to Apple on this website: Product Feedback - Apple.'
I have included this information in case anyone else is having this problem.
Thanks for everyone's input.