Welfare Reform Bill

Lord Kirkwood of Kirkhope Excerpts

Wednesday 23rd November 2011 Grand Committee

[Baroness Lister of Burtersett]

In moving Amendment 103ZZZA I shall speak also in support of Amendment 103ZA tabled in the name of the noble Baroness, Lady Hollins, to which I have added my name. In fact, Amendment 103ZZZA has been designed with the help of the Child Poverty Action Group to complement and support Amendment 103ZA, and it is just an accident of drafting that it is being taken first. I shall therefore start by speaking to Amendment 103ZA, which also has the support of Carers 2000 and a large number of charities and churches. The purpose of the two amendments is to apply to universal credit the rules on recoverability of overpayments that reflect those currently applied to most benefits in regard to official errors that a claimant could not have known about and to provide for the offset of underlying entitlement from overpayments, a concept that I shall explain in a moment.

The current rules on the recoverability of overpayments that apply to most benefits provide for recovery where overpayments have arisen because of,

“misrepresentation or failure to disclose a material fact by a claimant or by any other person”.

This is a fair and just test which has been in place for many years and has been tried and tested in case law. Its purpose is to allow the recovery of an overpayment which arises as the result of a claimant’s actions or failures, whether innocent or fraudulent, but protects the claimant in a case where the overpayment arises because of official error by the benefit authorities. In other words, it sanctions recovery in the case of negligence by the claimant but offers protection in the case of negligence by the state. I believe that this is a fair and just balance which reflects the responsibilities of claimants to correctly notify their circumstances when claiming benefit and the benefit authorities to calculate correctly and pay awards based on the information available to them.

Clause 102 proposes to allow recovery in all cases regardless of culpability. I believe that this alters the balance of responsibilities and justice unfairly in favour of the state. It would mean, for example, that a claimant could be presented with a large bill for repayment amounting to thousands of pounds many years after an overpayment occurred, even though the overpayment was due entirely to the negligence of the benefit authorities. In return for providing accurate and up-to-date information, I believe that a claimant is entitled to the accurate calculation of payment of entitlement by the benefit authorities and that the state should bear any losses caused by its own negligence.

In the other place the Minister of State accepted that there are some real issues around whether vulnerable individuals can or cannot be aware of the error that takes place when overpayments are made without them realising it, and they only discover afterwards that they have incurred a substantial debt. We have to be careful and sensitive in that situation. He went on to say:

“The real question about the clause, however, is whether it is sensible to establish safeguards in primary legislation that apply absolutes to a situation and which effectively say, ‘You can never do anything’”.—[Official Report, Commons, Welfare Reform Bill Public Bill Committee, 19/5/11; col. 1018.]

That recognition of the sensitivity of this is welcome, but my answer to the Minister’s question in this instance is “yes”. The Government’s view however, is, of course, “no”. Although the Government appear to have recognised the justice of the case, they have done so only by indicating that they will provide for non-recovery in cases of official error in a code of practice on recovery. Can the Minister say whether that code of practice will be published, whether it will be made public, and exactly what it will cover?

I do not believe that a code of practice is sufficient, and I would argue that it is essential that provision is statutory so that an aggrieved claimant has the right of appeal against recoverability to an independent tribunal. The claimant should have a clear right rather than be vulnerable to discretionary decision-making. The Government have expressed their confidence that the introduction of universal credit will significantly reduce the scope for official error. If that is the case, the administrative burden of retaining protections for claimants unjustly prejudiced by official-error overpayments should be greatly reduced.

The system of automatic recoverability, perhaps supplemented by a non-statutory code of practice as proposed in Clause 102, mirrors the system which applied to tax credits. This system has blighted the administration of tax credits, caused widespread injustice and hardship and has been widely condemned in the media and in reports by the Parliamentary Ombudsman and the Select Committees in the other place. It has also resulted in thousands of complaints to MPs, the Revenue adjudicator and the ombudsman.

Amendment 103ZZZA provides for the offset of underlying entitlement when calculating overpayments. Underlying entitlement means the entitlement that would have been paid to the claimant had the claim been made correctly at the time. For example, an overpayment might arise if a claimant had separated from their partner and the claim continued to be paid as a couple claimed for several weeks after the date of separation. The claimant had not declared the change of circumstances immediately and had told their personal adviser that they were not aware that they needed to because they had hoped that the separation was temporary. I think that sometimes, in those circumstances, you do not really want to face up to what is happening. If the claim is cancelled from the date of the separation then the claimant must make a new claim. However, had they immediately declared the change then their claim would have been reassessed as a single claim, so it would have given rise to entitlement as a single claimant which could be offset against the overpayment as underlying entitlement. I am sorry that that is slightly complicated.

This mirrors the provision in the housing and council tax benefit regulations which ensures that only the true amount of excess entitlement is recovered. This provision is particularly needed in relation to universal credit because there is a requirement for the benefit to be claimed by either a single claimant or by both members of a couple, which, as is the case with tax credits, results in many notional overpayments when there is a change of status from single to joint claims and vice versa. The Revenue has belatedly recognised the need for the offset of underlying entitlement in such cases and introduced non-statutory provision for this from January 2010. This Bill gives the opportunity of providing for offsetting on a statutory basis, ensuring that it is applied fairly, openly and consistently.

It may be that it is intended to do this in regulations. I must apologise because I have seen the draft regulations only today. I have had a quick look at them and it seems that they are perhaps intended to do that. I am glad that the Minister is nodding but it would be even better if he put it formally on the record so that we know that that is the case. I am very happy that for once the Minister is nodding rather than shaking his head when I am speaking. There is another question that I hope the Minister will be nodding at as well. Can he assure the Committee that there will be a right of appeal to an independent tribunal in the case of a dispute as to whether an overpayment was caused by official error and should or should not be recovered; or—I do not see any nodding going on there—if there is no such right of appeal, how will a claimant be able to challenge a decision to recover an overpayment?

In conclusion, this might appear to be a rather techy amendment. However, the strong lobbying by a wide number of churches and charities signals its significance. The reason they are so concerned is in part because they believe it to be simply unfair that a claimant might have to pay for a mistake made by the state. They are also concerned because they know from their own work what this would mean in terms of hardship and possibly increased debt to moneylenders and loan sharks as claimants’ benefit was reduced below the statutory minimum. Heaven help them if they are also subject to capping. I hope the Minister will look favourably on a small but important amendment, which serves to protect the underlying rights of claimants. I beg to move.

[Lord Kirkwood of Kirkhope]

My Lords, I support the case that the noble Baroness has made. I am particularly interested in the answer to the question about an independent appeal right in these circumstances. That would be very useful indeed and I hope that the Minister can confirm that that will be true.

I have four amendments in this group. They can be dealt with with reasonable dispatch but they deal with a very important issue that surrounds the whole question of amounts recoverable by deductions from earnings. During the Bill’s Commons stages the Government amended Clause 102 to add a new Section 71ZD(3)(e), which addresses the,

“level of earnings below which earnings must not be reduced”.

That is very welcome, as far as it goes, but I wonder whether the Minister could say a bit about whether any thought has been given to how that will be delivered and how that protection will be rolled out. That is important.