Welfare Reform Bill

Baroness Hayter of Kentish Town Excerpts

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.

[The Parliamentary Under-Secretary of State, Department for Work and Pensions (Lord Freud)]

My Lords, as we have previously discussed, Clause 103 is based on the premise that for those benefits within its scope, most if not all overpayments will be recoverable. I think we are all in agreement that a benefit recipient should not receive any more money than they are due; nor should they receive any less. In keeping with this general principle, we believe that a benefit recipient should not be allowed to keep money that they should not have received and that this should hold true even if they were not aware of the mistake. I do not think that we can accurately compare the issue of tax credit overpayments, raised by the noble Baroness, Lady Hayter, with that of benefit overpayments. That is because awards of tax credit are based on an estimate of what someone will earn, whereas benefit entitlement is based on actual information—and of course it will not have escaped anyone’s notice that the level of tax credit debt has grown significantly.

As we have discussed before, although the provision allows for all overpayments to be recoverable, this does not necessarily mean that overpayments will be recovered in all circumstances. We will endeavour to recover all overpayments where we are able to do so and where it is reasonable to do so without causing undue hardship. This remains a cornerstone of our overpayment recovery policy. The code of practice, a draft version of which has been distributed to noble Lords, will provide guidance about the circumstances in which recovery action will or will not be taken. It is intended that the code of practice will be available to the public in leaflet form and online. This will ensure that the decision-making process is transparent and that the right decisions are made about the recovery of overpayments. Where a claimant wishes to challenge a decision, they may exercise their right of appeal against it.

To pick up on the point made by the noble Baroness, Lady Hollins, on what compels decision-makers to apply the code of practice, the application will form part of the decision-making process, and failure to adhere to it would leave the DWP open to challenge and appeal on the decision itself or, indeed, judicial review for failure to apply good practice. While there may be no legal duty to comply, failure to do so renders the department more open to successful appeal by the claimants. So we have every incentive to adhere to the code of practice.

--- Later in debate ---

[Lord Ramsbotham]

My Lords, Amendment 62A is in many ways complementary to Amendment 62ZC, which we have just debated.

The purpose of the amendment is to try to ensure that the standard of evidence required of officials in local authorities or jobcentres when imposing civil penalties and recovering overpayments should be the same as that required in the courts when imposing fines and enforcing debts. I set out at length my reasoning for the amendment to the Grand Committee and I do not propose to repeat that now.

In Grand Committee I was grateful to the noble and learned Lord, Lord Mackay of Clashfern, who helpfully suggested that, as tabled, the amendment was too prescriptive. The Minister, while agreeing that it was right and proper that decision-makers gave full consideration to all the relevant facts provided by a claimant, who should also have the right of appeal, suggested that adequate protections were already in place. However, he also agreed to meet those who had drafted the amendment to go through the issues in detail. That meeting has taken place, for which all who attended—I hope that I am speaking for the noble Lords, Lord McKenzie of Luton and Lord Kirkwood, as well as myself—were extremely grateful.

Before that meeting I tabled the amendment in its current form. It proposes that, to better ensure the original intention, the guidelines recently published by the Sentencing Guidelines Council, chaired by Lord Justice Leveson, should be followed. At the conclusion of the meeting the Minister said that he wanted to work with those attending the meeting, whom he recognised as being concerned about vulnerable people, to get the guidance right and compliant with the Wednesbury principles on reasonableness.

The Minister also said that he would look again at the current guidance with the reworded amendment and see whether adjustment was appropriate, not least because of the similarity with the decision-making required, on the one hand, of the courts when imposing fines and enforcing debts, and, on the other, by officials in local authorities and jobcentres in raising civil penalties and recovering overpayments. I hope that the consistency resulting from what I propose will encourage the Minister to accept at least the spirit of the amendment. I note with interest what he said about the code of practice. I am sure that that is the way in which the guidance should be got to officials. I would welcome his reassurance that the guidelines about which this amendment speaks have been included in the working of that code of practice. I look forward to his response. I beg to move.

[Baroness Hayter of Kentish Town]

My Lords, on behalf of my noble friend Lord McKenzie, I also thank the Minister and the noble Lord, Lord Ramsbotham, for that meeting. I know that he found it of considerable interest and use. The noble Lord, Lord Ramsbotham, of course knows rather a lot about penalties, sanctions and their fairness. His amendment seeks to ensure that the appropriate guidelines and procedures are in place when a jobcentre or local authority imposes sanctions, fines or penalties on claimants, and particularly that, when officials impose such penalties, they give clear reasons for doing so.

Clarity about circumstances in which a penalty, sanction or overpayment can be recovered is vital if administrative justice is to be realised but also to enable claimants to have confidence in the system. It obviously also makes the job of officials considerably easier when there is a clear set of steps to follow and a clear description of the circumstances in which they should consider possible hardship to a claimant. It is also essential that the reasons for any sanction or repayment are set out, preferably in writing, so that the claimant, any adviser or a reviewer can understand the grounds on which the decision was taken. We look forward to the Minister giving us assurances that a set of guidelines, safeguards and relevant procedures will be in place so as to meet the aspirations set out in the amendment.

[Lord Freud]

My Lords, I need to start by thanking the noble Lord, Lord Ramsbotham, for arranging a really useful seminar the other week on a range of issues related to sanctions and penalties. I was equally impressed by the content of that seminar, the iron discipline with which it was conducted and how much ground we managed to cover. We are very keen to draw on the expertise of others as we develop our implementation plans. I look forward to continuing to work with interested groups in this collaborative manner. I gave a commitment in that meeting that we would work collaboratively with the groups involved. I am pleased to repeat formally here that that collaboration will happen.

Turning to the substance of the amendment, I hope I have made clear that we are really on the same page on many of these issues. We absolutely agree that clear guidance should be issued to officials making decisions on behalf of the Secretary of State where discretion is exercised. We do this now and will continue to do it under universal credit. Decision-makers will be required to follow this guidance when applying the law to the facts of the case where they consider a decision about a claim, sanctions for non-compliance with work-related requirements, a civil penalty or the recovery of overpayment. As is currently the case, we will make this guidance publicly available.