Welfare Reform Bill

Baroness Drake Excerpts

Monday 28th November 2011 Grand Committee

Moved by

[Baroness Drake]

104ZA: Clause 113, page 78, line 24, leave out from beginning to end of line 25 on page 79

[Baroness Drake]

My Lords, I shall also speak to Amendment 104AA. In Clause 113, we see the Government’s intention to introduce a civil penalty for negligence in providing incorrect statements for all categories of universal credit claimants. The penalty will also apply to the failure to disclose information. This is a probing amendment to understand why and how these penalty powers will be applied.

The civil penalty will be awarded where an error is not being dealt with through fraud action. The power to award will not be restricted to the Secretary of State but given to any authority that administers housing or council tax benefits, so it is quite a significant power.

Although there is an existing tax credit civil penalty regime, such a principle will now be extended to all universal credit claimant communities, many of whom are very vulnerable, such as those with disabilities or illness. What exactly is the offence and how will it impact on the population of claimants?

In response to a question from my noble friend Lady Hollis and me, the department has kindly advised that “negligence” should be construed in accordance with the everyday meaning of the word: that is, not exercising the care that the circumstances demand—in this context, being careless about, or paying insufficient attention to, the accuracy of any statement or information given in a benefit claim. Not exercising care and not paying sufficient attention are not actions that can be assessed for negligence without having regard to the capacity and the capability of the individual when providing that information.

More than 4.2 million adults lack the basic, day-to-day competences of functional literacy, 6.8 million adults lack functional numeracy, and I understand that it is estimated that two-thirds of claimants on income-related JSA have the functional literacy of an 11 year-old. There will therefore clearly be a higher concentration of adults with limited numeracy and literacy skills in the claimant population. As I have said, many claimants will also be vulnerable for other reasons—disability, illness or whatever. All these characteristics add up to a greater propensity for errors to occur and mean that the most vulnerable will be disproportionately hit by the civil penalty.

However, my arguments do not stop there. The Government are assuming that 80 per cent of claimants for universal credit will fill in their application forms online, but evidence from charities suggests that a much lower number will be able to do so without error; a more realistic figure may well be 40 per cent. What plans will the department put in place in the event that it becomes clear that the percentage of applicants who can fill in their forms online is significantly below that forecast?

Universal credit will also bring a new set of rules and people will not always understand what is expected of them. People have complicated lives, and even if someone is sitting next to them they may still get it wrong. Even when individuals want to get it right but are not competent, cuts to the funding for legal advice and the winding down of the local authority-based benefit services will mean that those who would otherwise have helped the claimant to fill in the form will not be there. Claimants may want help from face-to-face contact at Jobcentre Plus, but many centres are being closed and they are likely to be in urban areas and so they are remote from rural claimants. Yes, call centre staff will be available, but they may not be sufficiently experienced in the new rules, certainly in the early years of universal credit, and their guidance may lead to errors in the filling in of the form.

We have layer upon layer of capacity, capability and complexity considerations that, once added together, reveal why non-fraudulent errors will occur in statements and information provided by vulnerable claimants. This indicates a systemic series of reasons for errors that will not be addressed by exhorting the most vulnerable to be more personally responsible and hitting them with civil penalties. The most vulnerable claimants are often scared of filling in their forms, but now we have the potential to make them petrified. One can imagine their anxiety at receiving some heavy-handed departmental letter telling them that they are about to be fined. Their ability to know that it is a civil penalty rather than a criminal one may be a subtlety that misses them when they receive such a letter.

Let me ask the Minister three questions. First, can he give an assurance that civil penalties will not be introduced before transparent criteria are set out to ensure that claimants are not penalised for making innocent errors and failing to understand the need to report changes within a required timetable, and that definitions of “reasonable excuse” will take account of a claimant’s individual circumstances? Secondly, how will decisions about when to issue a civil penalty be made, and how and when will good cause be considered? Thirdly, how does the Minister expect to ensure that the most vulnerable and the most prone to make errors will not be unfairly penalised by the civil penalty—not the exhortation that the most vulnerable will not be hit but how he expects to ensure that that exhortation is met?

The reason given for the extension of the civil penalty power is to reduce claimant error and increase personal responsibility. The savings from introducing the civil penalty power will be £19 million over the three years to 2014-15, but the application of that power could have a considerable impact on some very vulnerable people. I understand that the Government’s estimate of the volume of civil penalties is just under 600,000 a year, which seems very high given that, first, universal credit is intended to be a simpler, more transparent system; secondly, that the number of penalties for tax credit claimants last year was, I understand, 1,221; and, thirdly, that there were 7,249 administrative penalties for the benefits service.

That leaves me concerned as to how these civil penalty powers will be used in practice, because in the impact assessment, fraudulent and criminal activity is lumped together with non-fraudulent and non-culpable—or potentially non-culpable—error. However, they are clearly not the same thing. The same community of people is not being addressed, but they are being considered in an almost holistic way in the impact assessment.

It worries me that the department appears to be applying a common mindset to both, which in part is my reason for tabling Amendment 104AA, which seeks to prevent the Secretary of State allowing any targets to be set that would prove an incentive to increase both the number and the value of civil penalties issued. The stated purpose of these civil penalties is to improve claimant personal responsibility. However, we know over time from our own common sense and experience that organisational cultures can result in such penalty powers being abused for reasons other than their original purpose. The punitive intention increases, or they become an opportunity to raise money.

In a world where there is increasing competition for access to tax revenues, civil penalty powers will be vulnerable to abuse. They could end up being deployed more aggressively to improve revenues or to be punitive. One can think of examples of where ordinary people think that this may have happened. For example, are the approaches to catching people speeding and the margin of tolerance over the speed limit determined by a desire to incentivise good behaviour and avoid bad, or has it become a means of raising revenue? Did some local authorities deploy surveillance techniques against ordinary citizens for reasons never intended by legislation? Whatever the validity of people’s thoughts on these matters, they are an indication of concerns as to how civil penalty powers can be deployed in a way that was never intended.

I would prefer the civil penalty not to be there, but certainly I want to ensure that the powers to impose civil penalties set out in Clause 113 of the Bill are never abused. The recipients of that abuse are most likely to be vulnerable people who easily make mistakes, and who could come to fear the department’s staff as a sort of form of police force that is free to hand out fixed civil penalties at will. Any targets set would almost certainly be set by reference to national standards, and this amendment seeks to prevent the Secretary of State from ever allowing such standards to be set. The population does not conform to national standards. There are differences in localities, in regions, in demographics, in educational attainment, language skills, level of employment, labour market characteristics, which all have an impact on the volume of forms likely to be completed incorrectly. There will be a concentration of impact from these civil penalties if targets are applied.

In summary, I am a strong believer in public service and support, but I have a great antipathy to the deployment of bureaucratic power that frightens or abuses people. I have real concerns about the deployment of this civil penalty and I look forward to the Minister’s response to my questions.

--- Later in debate ---

[Lord Freud]

Clearly, there are always difficult and special cases. I suspect that an old lady would not be eliminated entirely. The answer is that there is support for people with particularly tricky circumstances. We will work with local authorities that will be collocated in many cases, especially with the single fraud operation being set up. The shades of grey, which will start to rule out negligence, will be very evident in most of those cases.

In justification of the £50, that sum was chosen because we believe that this is a sufficient amount that will act as a punishment and make claimants more personally responsible for the overpayments they incur and encourage a positive change in their future behaviour. We have also set a significantly lower amount than the harsher punishments available for fraud offences, which reflects the fact that it is directed at the failure to take proper care of a benefit award and is not about fraudulent behaviour. Under the appeal process, the claimant will be able to appeal against the overpayments decisions, the civil penalty or both.

For those reasons, I urge noble Lords to reject Amendments 104AA and 104ZA.

[Baroness Drake]

I thank the Minister. Perhaps I may address some of the points that he raised because I still feel deeply concerned. I probably have slightly more concerns now than I did previously. I do not say that provocatively and I will try to say why. First, it should be made clear that this is a civil penalty that does not deal with fraud issues. There are separate clauses for that. The stated purpose of this civil penalty is to improve people’s behaviour in the accuracy of their form-filling. The concept of introducing the civil penalty worries me, particularly for a community of people with a greater concentration of the vulnerable and lower levels of numeracy and literacy, and when we are taking this means of a civil penalty to address behaviours, some of which are systemic and cannot be dealt with simply by handing out civil penalties here, there and everywhere—notwithstanding that the Minister said that that is not the intention.

The Minister said that Clause 113 goes on to say that there will be no penalty if you take reasonable steps to correct the error, but the point is that someone cannot take reasonable steps to correct an error if he does not know that he has made it. That is the problem. Someone could face the civil penalty before having the chance to put it right because he does not know that he has done something wrong. A concentration of people will be increasingly in the category of not knowing that they have made the error when filling out the form.

The Minister also said that I should not be worried about how the powers will be deployed, but he gave me one of the reasons why I am concerned. Quite rightly, and I do not disagree with him, he said that a civil penalty always comes at the same time as recovering an overpayment. If you issue a civil penalty, you have confirmed that there is an error, so it must follow that there is the recovery of an overpayment. If ever an incentive were articulated, that is it. You do not have to exercise discretion on overpayments; the awarding of a simple penalty puts you straight into going for that overpayment. No other considerations come into play. You make the easier decision to award a civil penalty because you do not then have to make the more complex decision about how to apply a discretion to an overpayment.

[Lord Freud]

My Lords, let me make this absolutely clear. It is the other way round. You can charge a civil penalty only when there has been an overpayment and you would not necessarily charge a civil penalty when there was an overpayment unless you associated that overpayment with negligence.

[Baroness Drake]

That is my point. If civil penalties and overpayments are inextricably linked, you would not award a civil penalty unless there had been an overpayment. You can almost produce an incentive to put something into the category of an error attracting a civil penalty because it makes it easier to justify chasing the overpayment.

[Lord Freud]

My Lords, I must make this absolutely clear—it is my third go at this. An overpayment happens when someone is paid something they should not have been paid. A civil penalty will be charged only when there is both negligence and an overpayment. I forget the logical post hoc, or whatever. We need to get it round the right way.

--- Later in debate ---

[Baroness Drake]

I am still not persuaded. I will stay with my point; I still remain concerned about targets. The Minister says that he has turned his back on targets. I accept that, but his assurance does not bind future Secretaries of State, who may not turn their backs on targets. Once this provision is in the legislation it is there for future Ministers and Secretaries of State to use.

I come back to the point that one cannot take reasonable steps to deal with an error unless one knows that one has made an error. This is the weakness with the example of the dentist appointment. With that example, you know that you have an appointment and therefore are in trouble for failing to meet that appointment. You do not necessarily understand, comprehend or know that you have made an error, or you may not necessarily have intended to make an error, in the form that you have filled in.

The Minister says that the Government have amended their figures by raising from £15 to £65 the level at which overpayment action would be triggered and that the number of penalties has been moved down to 400,000. I still think that that is a very large number. The Minister expects that penalties will apply to only half that number—to 200,000. I still think that that is quite a large number. That is his expectation, but once that power is awarded who knows what the figures will become, how the guidance in the department will be enacted and what the resultant figures may be? I do not think that noble Lords can be asked to express their approval or otherwise of a clause in a piece of legislation simply on the expectation of how a Minister would choose to deploy that power. One has to stand back and ask what the power is that the Government are taking to themselves. I am still left with concerns.

The Minister said that the Bill provides the powers but that you do not have to use them. That is not a compelling argument for not worrying about this clause. I am no lawyer, but I thought that one of the points of having rational legislation is that it protects the citizen against irrational political behaviour. An argument based on a disposition to use or not use a power at any particular time by a given set of Ministers does not really address the merits of whether there should be such a clause in the Bill.

The other issue is the £50 itself. The impact assessment says that,

“a £50 flat rate was determined as an appropriate starting point for benefit claimants to encourage better care of their claim”.

As that says, it is a starting point. Who knows how, over time, that level of penalty will evolve?

The Minister made the point that there will not be a scattergun approach to the civil penalty but that there will be clusters of mistakes on which the focus will be. That is good. If there are clusters of mistakes, it sounds dreadfully efficient to concentrate on them, but that is no reason for introducing a civil penalty; it is a reason for looking at managerial action or process or procedure, or focusing resources to address those clusters. Simply saying that every benefit claimant who does not fill out their form properly will now be subjected to the potential powers of a civil penalty seems a slightly over-the-top response to dealing with clusters of mistakes.

With all due respect, we have clusters of errors by the department and by local authorities. There are significant errors. I cannot believe that there would in the same way be penalties on staff who make those errors, and I would be completely opposed to that too. Errors often occur in the system for systemic reasons. That is different from fraud or from somebody knowingly tweaking their form or deliberately filling it in incorrectly in order to tip the benefit advantage in their favour.

[Lord Touhig]

Could my noble friend say—perhaps in response to the Minister’s answer to the noble Countess, Lady Mar, when he said that it would depend upon the circumstances, and following on the point just made by my noble friend—whether she thinks it would be helpful if the Minister, before Report, could provide us with the number of cases in which the department has accepted that an overpayment has been its fault and has not pursued it, and the number of occasions on which it has found that it has been the client’s fault and pursued that?

--- Later in debate ---

[Lord Freud]

I will need to write.

[Baroness Drake]

On the clusters point, clusters will presumably arise by type of error or a particular demographic of those filling in the form erroneously. I come back to my point that that issue should be dealt with not by civil penalties but by taking a more focused look at how one deals with those types of problem. I welcome the Minister saying that he is absolutely for the forbidding of targets. As to whether a future Government would be so constrained, no doubt noble Lords can argue with a future Government if they want them to be so constrained. We are trying to constrain this Government, so I certainly welcome any offers to constrain the way in which this civil penalty is used, although my preference is for it not to be there. I worry about the concept of a civil penalty and its deployment in the community of people whom we are discussing.

Finally, the Minister said that information is readily available, but you need to be able to understand it. No doubt he would say that if you do not understand it you should seek further advice from the department. However, I come back to the issues around the numeracy and literacy skills of this community of claimants. My point is that a new system of civil penalties is coming in. This partly goes to the point that my noble friend Lady Hollis made about trying to run a system of civil penalties when a new system is coming in. There will be less opportunity to find the people who this community of people normally approaches for support and help in filling out their forms because legal aid support through the advice system will not be there. We know that the local authority service will be run down, given the way in which benefits will be dealt with. We know that Jobcentre Plus venues are closing, and the jury is out as to how efficient a call centre system can be—certainly in the first few years—in supporting some of the vulnerable claimants who could be caught by erroneously filling out their forms. I beg leave to withdraw my amendment.

Amendment 104ZA withdrawn.