No-fault Benefit Debts

David Linden Excerpts

Thursday 21st July 2022 Commons Chamber

[David Linden (Glasgow East) (SNP)]

I am very grateful to have secured this debate, particularly as the last item of business before we rise for the summer recess. Before moving on to the substance of the debate, I would like to take this opportunity to wish everyone in the House, especially the staff, a very happy, peaceful and restful break.

A number of organisations have been incredibly helpful in briefing me for this debate, including StepChange, the Child Poverty Action Group, the Salvation Army and my local citizens advice bureaux in Easterhouse, Parkhead and Bridgeton.

Other than housing and asylum, benefits and social security issues make up the largest cohort of my constituency casework. In the five years that I have served in this House, I have seen endless problems with the social security system, which too often is found wanting when it comes to protecting the most vulnerable in our communities.

The issue I want to hone in on today is no-fault benefit debts. That is not to say that there are not other aspects of our social security system that could do with repair, but in the interests of time I will confine my remarks solely to no-fault benefit debts. I am particularly appreciative of my colleagues in the Child Poverty Action Group, whose early warning system flagged this matter up.

Let us look at a particular case study that brings a human angle to the issue, rather than focusing on dry regulations, as can often be the case. Jess and Mark have a benefit debt of £600 because they were accidentally paid too much universal credit. The Department for Work and Pensions has acknowledged that it made a mistake when it worked out their entitlement, but it is asking for the money back, and Jess and Mark are legally obliged to pay it. Since they do not have the £600—they thought it was theirs, so they have spent it on essentials for themselves and their two children—the DWP is recovering the debt by taking £80 a month off their universal credit. Jess’s and Mark’s income was already low, and now they simply do not have enough to live on.

Unfortunately, this issue is becoming a more common concern. There are a few more case studies I would like to draw the House’s attention to. One claimant with a mental health condition has been left with an overpayment because he was accidentally given too much help towards his rent—that is, the wrong local housing allowance rate was applied; he had his young son staying with him but only the minority of the time. He could not have been expected to spot that pretty technical error.

A lone parent of a 10-year-old with disabilities was overpaid UC through no fault of her own—she received the severely disabled child element of UC when she should have received the disabled child element only. Again, she could not have been expected to spot that; but again, she is liable to repay the difference. A bereaved claimant with diabetes and osteoarthritis was overpaid UC when the DWP failed to act on information that she herself had given them about a private pension she had inherited from her late husband. She is now paying back the overpayment at £48 a month. As of April this year, she still had another 17 months of that left to go.

No matter how an overpayment of universal credit happened, the Department for Work and Pensions can ask for it back, even when somebody has done nothing wrong and indeed has done everything that could reasonably have been expected of them.

[Jim Shannon (Strangford) (DUP)]

I commend the hon. Gentleman for bringing this important issue forward. He has outlined some cases; I had a similar case, and I commiserate with his constituents. Does he not agree that when someone has done all they can to be open and honest and there is clearly no fault for which they can be responsible, the stress of debt repayments on a household can be crippling? There must be a compassionate clause that can be used to override the computer systems. I think that is what the hon. Gentleman is asking for; it is certainly what I would ask for.

[David Linden]

I thank the hon. Gentleman. When I and the hon. Member for Lancaster and Fleetwood (Cat Smith) visited his constituency office on holiday during the Easter break, I saw at first hand how hard he works for his constituents; there were piles of casework all around him that day. His intervention is born of the fact that he is a hard-working constituency MP and can see the reality of this issue. He is right to call for that special clause.

Speaking about the rule before the introduction of universal credit, the then Employment Minister, the right hon. Member for Epsom and Ewell (Chris Grayling), said:

“The practical reality is that we do not have to recover money from people where official error has been made, and we do not intend, in many cases, to recover money where official error has been made.”––[Official Report, Welfare Reform Public Bill Committee, 19 May 2011; c. 1019.]

Yet the DWP almost always asks for the money back now. Overpaid claimants can ask the DWP to waive recovery, but only about 10 waiver requests were successful in 2020-21, set against 337,000 new overpayments caused by DWP mistakes in the same period. The DWP openly asserts that it will abandon recovery only in “exceptional” cases.

When the DWP insists on recovering a no-fault debt, it has the power to make large deductions from somebody’s future universal credit payments—up to 15% of their standard allowance. To be clear for those watching today’s proceedings at home, I should say that the standard allowance is the amount that the Government believe a person needs to live on, so reducing it by 15% certainly causes hardship. The Government have already suspended energy companies from that, so why on earth are they doing it?

All this is out of line with basic ideas about fairness and fault. The rules about recovering overpayments are very different from what they were for the legacy benefits and tax credits that the universal credit system replaces.

[Chris Stephens (Glasgow South West) (SNP)]

I thank my hon. Friend for securing the debate. There is another issue here—this goes back to fairness—about the case law on the overpayment of wages, where there is an error in law and an error in fact. Perhaps that is something the Department should reconsider.

--- Later in debate ---

[David Linden]

I am grateful to my hon. Friend, who not only has a close interest in this issue from a constituency point of view but serves on the Work and Pensions Committee and has seen it at first hand. He makes a valid point, and it is on the record.

The new system is leading to financial hardship and debt, and it is likely to have long-term consequences for the health and wellbeing of adult claimants and their children.

One less obvious consequence of the rules is the potential for a decline in the quality of DWP decision making. Now that overpayments can be claimed back, it is possible that decision makers will not feel the same pressure to get decisions right first time. If that is the case, it will have consequences for DWP debt figures.

I have a number of recommendations to put to the Minister, who I have enormous respect for, and who I know to be somebody who listens, especially to those of us who have a significant constituency case load of DWP matters. First, I would like to see the Government change the rules so that no-fault universal credit debts are non-recoverable. That was the position for legacy benefits, for a good reason.

Secondly, the Department should ensure that decision makers are trained on the updated “Benefit overpayment recovery guide” and that recovery decisions truly take into account the list of factors in paragraph 8.4, including the circumstances of a debt and the conduct of the individual. Although that guidance changed in February 2022, we have not seen any changes in actual decision making.

Thirdly, I would like to see the Minister change DWP policy so that no deductions are made while someone is waiting for the outcome of a waiver request or appeal. Again, much of this was standard practice for the older benefits and tax credits.

Lastly, the Minister should set a 5%—not 15%—maximum for Government debt deductions, bringing them in line with deductions for other kinds of debt.

I have outlined how these issues are adversely impacting my constituents, and indeed people right across these islands. Not only that; I have also outlined some practical solutions that I think could alleviate the immense difficulty that the state is unnecessarily inflicting on those we represent. It is clear that these issues are occurring more and more, and it would be an abdication of responsibility for me, as a legislator, not to flag them up to the Government as a concern. But it would be even more of an abdication of responsibility on the part of the Government not to act to resolve them. I look forward to giving the floor to the Minister, who I am sure will be keen to work with me and our constituents to help resolve these issues.

[The Parliamentary Under-Secretary of State for Work and Pensions (David Rutley)]

I congratulate the hon. Member for Glasgow East (David Linden) on securing the debate. It is always a pleasure to follow the Deputy Leader of the House, who was responding to the Sir David Amess summer Adjournment debate—even the fact that the debate has been named after him is very moving.

I also congratulate the hon. Member for Glasgow East on his tenacity and assiduous approach to these issues and many others in this space. Of course, today he has been rewarded with the last Adjournment debate before the summer recess, which shows not only his keen interest but his dedication. I have always valued our exchanges, because he raises important issues and I try to respond as best I can. I do not doubt his sincerity in these matters.

The Department for Work and Pensions plays a pivotal role every day, including through paying benefits to millions of households in a timely and accurate way, providing the vital welfare safety net that people need. In addition, where people are able to work, work coaches in our jobcentre network help our claimants into sustainable employment all across the United Kingdom.

The universal credit system rose to the challenge of the pandemic admirably. The DWP redeployed staff, harnessing the agility of the system to process benefit claims remotely, and paid over 3 million households. Incredibly and crucially, we kept payment timeliness at very high levels during that time of genuinely global disruption. To illustrate the strength of our welfare system, despite the challenges I have laid out, the statistics from the 2022 financial year show that universal credit official error overpayments were at their lowest recorded level of just 0.7%, having fallen for the third year in a row. Despite the record low levels of official error, which I am proud to be able to set out, I want to assure the hon. Gentleman and other Members that we are absolutely committed to improving further on that record. The good news is that as a percentage, we are on a downward trajectory and we want to go even further. Not only do we run extensive checks to rule out fraud, but we also have a series of internal checks in place that allow us to correct errors pre payment and to learn from any errors we do make to minimise the risk of reoccurrence.

As Members may be aware, under section 105 of the Welfare Reform Act 2012, any overpayment of universal credit, new style jobseeker’s allowance or employment and support allowance in excess of entitlement is recoverable. This includes overpayments arising as a result of official error. The approach ensures fairness for the taxpayer and that claimants receive the appropriate amount of support given their circumstances. The Department seeks to recover benefit overpayments as quickly and efficiently as possible, including prescribed official error debt, but it is committed to doing so without causing undue financial hardship. The hon. Member for Strangford (Jim Shannon), who also deserves a medal today for his assiduousness and tenacity, should be cognisant of that fact. He used the word compassion. We try to lean into that important word through the process we embark on. We do not abandon people in financial difficulty, and we will always work with and support any individual who deserves our help.

We understand the difficulties claimants can face, which is why we have taken action and lowered the standard cap on deductions from universal credit twice in recent years, from 40% to 30% in October 2019, and then to 25% in April 2021. I am sure Members, particularly those who follow these matters, will appreciate that in April this year a temporary change was introduced, so that for 12 months only benefit claimants themselves can ask the DWP to pay their ongoing energy bills directly from their benefit or alter any existing arrangement. This ensures that claimants have greater autonomy over their benefit award at a time when energy prices are at a record high. Deductions are taken in priority order, which means that higher priority deductions such as utility payments are taken first, with debt only taking up the remainder of the overall cap. Where a person feels they cannot afford the proposed rate of recovery and the debt has not arisen as a result of fraud, they are encouraged to contact us.

[David Linden]

I am very grateful to the Minister for giving way. One issue, which came up in a call I had yesterday with StepChange and a number of other advice lines and organisations, is that when people try to get through to the Department to that specific team, it is incredibly difficult to do so. I am not asking for a miracle at the Dispatch Box, but can he go back to the Department and consider whether it could be made easier for people to get in touch with the Department when they face such financial hardship?

[David Rutley]

The hon. Gentleman makes a good point. I will take it away for sure and follow it up. I have replied to StepChange recently in its correspondence with me, or I am about to do so, on those very same issues. He makes a good point and I will genuinely follow up on that.

The Department is then able to work with individuals, reviewing their financial circumstances and, in most instances, agreeing a temporary reduction in their rate of repayment. We have recently extended the time period, from 12 months to 18 months, before any reduced debt repayments are reviewed. To ensure people can get in touch, we are automating processes, freeing up debt management staff time to respond to customer calls and provide timely support. Again, I acknowledge the hon. Gentleman’s point and will follow up on it. We also have a rapid response team in place to help manage calls at peak times.

I thank the hon. Gentleman for the specific recommendations he made. He mentioned the distinction between legacy benefit official error debt and universal credit official error debt. Because of existing legislation, he is right in saying that the Department writes off legacy benefit official error debt, but, as hon. Members will know, Parliament voted to end legacy benefits and to make universal credit the welfare system of the future. The intention is that the vast majority of working age claimants will move to universal credit by 2024, and a long-standing part of the universal credit system is that official error debt is recoverable. The 2012 welfare reform changes were designed to ensure that claimants took ownership of all aspects of their claim, including the accuracy of their payments. I reassure the hon. Member that I understand the points that he has raised and that, as a Department, we recognise that official error can cause disruption to our claimants, which is why minimising these occurrences is a major focus.

The Department maintains vigorous control of the official error via its quality assurance framework, which provides an assurance that the necessary quality controls are in place. Additionally, an independent quality and assurance team checks transactions conducted within DWP benefits, and this insight informs training requirements, infrastructure improvements and risk management processes. A senior stakeholder group, comprising directors, oversees the quality agenda. I am confident about the approach that our Department is taking. We are minimising the occurrence of official error, and also recovering payments where this unfortunately does occur. We need to balance our duty to the taxpayer with the need to deal with customers sensitively and appropriately. In that context, we do not think it is unreasonable that all overpayments are repayable.

The hon. Member also asked that we ensure that decision makers are involved in determining whether overpayments should be repaid. We are trained to take account of the factors listed in the benefit overpayment recovery guide. I can give the hon. Member a very clear assurance that this is the case, and also that regular refresher sessions are undertaken. The guidance to which the hon. Member refers was updated to give further clarity on some of the factors that have always been considered relevant when deciding whether to grant a waiver, as well as the evidence that should be provided to support an application. I am confident that this guide will make it clearer from the outset what evidence should be supplied in support of a request for waiver. We, of course, recognise the importance of doing all that we can to safeguard the welfare of claimants who have incurred debt. Our debt management agents are trained how to recognise signs of vulnerability, which is a critical point, and how best to support those customers.

My Department also has a network of advanced customer support leads to provide additional support to our most vulnerable customers. We are working in partnership with the Money Adviser Network, which offers free, independent and impartial money and debt advice, to routinely refer indebted customers to their service. In addition, the guidance to all universal credit agents is being reviewed to ensure that cases that may be appropriate for consideration of waiver are duly identified and referred to the waiver team for consideration.

Recovery of benefit debt must be balanced against the claimant’s social obligation to repay the money they owe to the Exchequer or the taxpayer. In April 2021, we reduced the cap on standard deductions to 25%, as I have explained, and at the same time we doubled the new claim advance award period to 24 months. This provided all new universal credit claimants with greater flexibility over how they received their advance. Such changes have helped hundreds of thousands of UC claimants retain more of their award in any given month. Some people have advocated for a reduction of the maximum deduction rate for the Government debt, as the hon. Member has done today. However, the limits that we currently have in place strike the right balance between managing the social obligations while supporting claimants with debt. To be clear, reducing the threshold further would risk key payments, including child maintenance, not being fulfilled. I think that those points need to be considered, notwithstanding the concerns that he has raised.

In addition, through the universal credit system, the recovery of universal credit and tax credit overpayments can be taken up to a maximum of 15% of the standard universal credit allowance, although this can be higher where a claimant has earnings. As I have said already, we understand and take seriously the impact that the recovery of overpayments can cause. However, reducing the 15% cap would extend the length of time until claimants return to their full UC award, and there is already a significant amount of support that is available for claimants repaying these overpayments.

Claimants can already contact the debt management to agree an affordable rate of repayment. There is no minimum amount that a person is expected to repay; they can pay an amount less than 5% if that is all they are able to afford. That is an important consideration.

Moving on to the last of the hon. Gentleman’s points—I have taken them in a slightly different order—the Department can waive benefit debt in exceptional circumstances, but waivers are generally granted only in truly exceptional circumstances where it can be clearly demonstrated that a person’s circumstances will improve only by waiving the debt. Such requests are rare, and there would normally need to be specific and compelling grounds for a waiver, such as when the recovery of the debt was causing either long-standing financial hardship or welfare issues for the debtor and their family. Waivers are granted at the discretion of the Secretary of State.

As a number of requests is low, we do not normally feel it is necessary to stop recovery during the waiver process. When a request is received, it usually follows a discussion with the claimant regarding recovery of the debt, and that discussion often already results in a reduction or could involve a suspension in recovery, so there are other factors we can consider in the journey of the individual claimant. Further along in the process, we do not suspend recovery of an overpayment during the appeal process because, in legislation, anything paid in excess of entitlement is recoverable, and there is no right of appeal against the recoverability of the overpayment. The Department is responsible for ensuring fairness to the taxpayer because, as I stated earlier, overpayment is effectively debt that is owed to the taxpayer.

It is also worth highlighting that other measures are in place to support people struggling with debt, such as the breathing space scheme, which I think we may have mentioned in previous debates. The hon. Gentleman knows about it, so I will not prolong this point. Let us use all the tools that are available. In Scotland, the debt arrangement scheme provides similar support to that available in England.

We recognise that people are facing serious challenges in Glasgow, in Scotland and across the United Kingdom and much of the world, and I think even the hon. Gentleman acknowledges that we have put a significant package on the table. We have had similar debates, so I know he feels that it is not quite enough, but it is substantial none the less, now totalling £37 billion. We as Members have a duty to communicate and reassure people that a package of support is being made available to them. The £326 means-tested cost of living payment has gone out to nearly all eligible benefit claimants, but others will receive the first of those instalments by the end of the month. Claimants will get a second payment to get up to £650 well before Christmas, which will be vital for their budgeting at that time of year. The £150 disability cost of living payment will be made available in September. The energy bills support scheme will also provide £400 for all who have a domestic electricity contract. Of course, pensioners will receive—I know the hon. Gentleman has strong views on the support available—£300 on top of their winter fuel payment.

Whatever our views on the different approaches to supporting people in poverty and those facing financial challenges, a significant amount of support is available. I will be doing all I can to help to communicate that, and I am sure he will do the same with his constituents. I want to put it on the record that, through the programme of support that will be put in place, 8 million low-income households in the United Kingdom will receive a package of support of around £1,200, which will be of significant help in these challenging times.

Of course, additional funds will be made available through the household support fund in England. There is similar support in Scotland; I have learned from previous debates that it does not total £79 billion in Scotland—that is for Scotland, Northern Ireland and Wales—but it is £41 million in Scotland. I am grateful that the hon. Gentleman has taught me that lesson in previous debates. None the less, further funds have been put in place to help people with the cost of essentials.

To conclude, I hope that the hon. Gentleman recognises that the Government are taking a considered and balanced approach to the recovery of debt. We are not overlooking, and will not overlook, anyone who needs our help and is struggling during these times of financial uncertainty. Equally, we will always strive to be both fair and equitable to people who are paying back the debts that they owe. We will continue to recover debt where the law allows, but we will also try to set recovery plans that are sustainable for the individual. If people are concerned about their benefit debt, I encourage them to contact the Department to discuss the help and support that might be available to them.

I thank the staff for their amazing work this year and I thank you, Madam Deputy Speaker, for your support throughout the year and in similar debates. I wish the hon. Gentleman and other Members present a good recess. I wish to pass on my huge thanks to the officials at DWP who have provided me with a huge amount of support over recent months. It is much appreciated and they do sterling work.