Welfare Reform Bill

Debate between Lord Bichard and Baroness Hayter of Kentish Town

Wednesday 25th January 2012 Lords Chamber

[Lord Bichard]

I support this amendment as someone who used to be responsible for delivering the benefits system. When I was in that position, I remember railing against the complexity of the system and am therefore delighted that we are doing something about that. I also railed against the complexity of some of the bureaucratic communications that were sent out. Since I am now more often on the receiving end of those kinds of communications, I fear that my railing had little impact because they are still excessively complicated and I find it quite difficult to understand some of the letters that I receive.

It is placing a very heavy burden on benefit recipients to expect them to understand fully all the communications that they receive and therefore fully to appreciate sometimes when an overpayment has been made. For those of us who had an overpayment of, say, an occupational pension that we have to repay, irritating though it is, we can probably afford to do that over a period of time. It is a very different issue for a benefit recipient to repay a large sum of money in their circumstances. Therefore, I support the amendment. It is really important to get some clarification of the situation as we move forward.

[Baroness Hayter of Kentish Town]

My Lords, it seems that the HMRC’s position on tax credits is to say, “If we fail to meet our responsibilities but you meet all yours, we won’t ask you to pay back all of an overpayment caused by our failure”. That is quite a strong statement of their side of the bargain and recognition of an error made by HMRC. Its own code of practice and guidance sets out the limitations of payments where a claimant is experiencing hardship and the circumstances in which an overpayment will be written off.

Given that we will now have a new and unfamiliar system of universal credit, once it is clear both that there has been an official error and that the recipient could not possibly have known about it, if all those overpayments were to be clawed back in those circumstances the officials would have precious little incentive to get the system right, despite the hardship that that could later cost claimants who, through no fault of their own, were overpaid.

In Committee, the noble Lord, Lord Freud, said:

“Although the starting point for overpayment recoverability will be that almost all overpayments of working-age benefits … will be recoverable … DWP will consider a claimant’s means, income or expenditure if the debtor”—

I do not like that word because it suggests that the claimant in some way invited this—

“considers that they are in hardship”.

However, that means that repayment is essentially means-tested in that the DWP will have the discretion to write off an overpayment based, in the Minister’s words, “on their individual merits”.

The Minister promised the Committee that the DWP,

“will ensure that deductions from benefit or earnings to repay an overpayment should not lead a debtor”—

a claimant—

“to suffer undue hardship”.—[Official Report, 23/11/11; col. GC 468.]

However, it seems to me that this has two problems. First, it is discretionary and possibly means-tested but without anyone knowing the rules. HMRC’s draft code, which was sent to us in December, as the noble Baroness, Lady Hollins, has said, says only that it might decide in exceptional circumstances not to seek recovery of an overpayment or part of it and that there are no prescribed circumstances for a discretionary write-off, although it hints that it would do so only in cases of immediate significant family hardship or a threat to their health, and emphasises that hardship is taken to be “other than financial hardship”.

Secondly, the code relies on claimants knowing that they can appeal against a required repayment without having been informed about that. The draft leaflet really does not make it very clear, nor does it explain how to appeal. If I have understood it correctly, it says only that you can consider the amount that is being asked for, but not the fact that you have to pay it because of your own circumstances. The Minister said in Committee,

“that if the debtor considers they are in hardship, they can say that and then there is a process built on that”,—[Official Report, 23/11/11; col. GC 469.]

but it is not clear how that would work. If this amendment falls and the system proceeds, will the Minister assure us, first, that anyone asked to repay to cover for official error will be told of their right to appeal; secondly, that they will be given rather more guidance than that given in the draft leaflet as to the circumstances in which any write-off will be allowed; and, thirdly, where the repayment is sought from landlords, which in certain cases it would be, that they will also have the right of appeal against a loss of income over which they will have no control?

The Minister knows that the IT problems caused significant headaches and hardship for many claimants in the early days of tax credits. Getting the position right on overpayments and ensuring that claimants do not feel that they have been unjustly made to pay for the errors of government officials will be essential to building confidence in universal credit. We look forward to the Minister’s response to these and the other queries raised, and emphasise that this amendment is about the consequences of official error, not of claimant mistakes.