Public Authorities (Fraud, Error and Recovery) Bill

Lord Verdirame Excerpts

Report stage
Tuesday 21st October 2025 Lords Chamber

Moved by

[Lord Verdirame]

109: After Clause 97, insert the following new Clause—
“Overpayment recovery(1) Section 71ZB of the Social Security Administration Act 1992 (recovery of overpayments of certain benefits) is amended as follows.(2) In subsection (7), at beginning insert “Subject to subsection (7A),”(3) After subsection (7), insert—“(8) An amount recoverable under this section may only be recovered by deduction from benefit—(a) where the Secretary of State has first—(i) given the liable person a notice setting out the rate of deduction from benefit and the basis for it, and(ii) invited the liable person to make representations about the affordability of the rate of deduction from benefit,(b) if the Secretary of State is satisfied on the basis of the information received by virtue of (a)(ii) that recovery of the recoverable amount—(i) will not cause the liable person to suffer hardship in meeting essential living expenses, and(ii) is otherwise fair in all the circumstances, including taking into account whether the overpayment was caused by a failure to act, a delay or mistaken assessment by the Secretary of State, and(c) if recovery is commenced before the expiration of six years from the date on which the recoverable amount was paid.”(4) In section 191 of the Social Security Administration Act 1992 (interpretation - general), after the definition for “inland revenue” insert—““liable person” means the person from whom a recoverable amount is recoverable;””Member's explanatory statement
This new Clause would bring the safeguards for recovery of overpayments by way of deduction from benefit into line with (1) the safeguards contained in Schedule 5 of this Bill in relation to the new powers for recovery from bank accounts, and (2) the limitation period that applies to recovery of overpayments by way of court action.

[Lord Verdirame (Non-Afl)]

My Lords, this amendment follows on from a previous amendment tabled by the noble Baroness, Lady Lister, in Committee. It also has support from the right reverend Prelate the Bishop of Leicester and the noble Baroness, Lady Finn. I am very grateful to both of them. Since Committee, the noble Baroness, Lady Lister, and I have engaged with the Minister, who has been very helpful and constructive. I also thank the Public Law Project for its assistance, not least in navigating a complex area of law and public policy.

The amendment seeks to ensure that the recovery of overpayments by deductions from universal credit payments, which is the DWP’s preferred method for recovering overpayments from people still in receipt of universal credit, is fair and affordable. It seeks to achieve this objective by adding a new subsection to Section 71ZB of the Social Security Administration Act 1992. The new subsection would have two effects.

First, it would require DWP to consult claimants before deductions are applied and to ensure that the rate of recovery is affordable to that individual. The version of this amendment that we debated in Committee would essentially have written off official error overpayments. The version that we have brought on Report is wider in scope, in that it applies to all overpayments, not just those due to official error, but it is also less ambitious in that it does not require any write-off of overpayments.

The second effect of the amendment is that it would limit the powers of recovery to overpayments that are less than six years old, in line with the limitation period that applies to the recovery of debts through the courts. In Committee, the Minister stated that the department’s preference was,

“always to agree an affordable and sustainable repayment plan”.—[Official Report, 25/6/25; col. GC 16.]

This is not currently the approach applied to the recovery of overpayments from individuals still in receipt of benefits. Instead, in these circumstances, DWP has the power to deduct 15% of an individual’s monthly universal credit payments directly, with limited notice and without the individual’s consent. For a single adult aged 25 and over, this amounts to a sudden, unanticipated loss of £60 a month.

The current approach to the recovery of overpayments stands in stark contrast to the requirements that apply to commercial lenders, such as banks and utilities companies, which are required by regulation to engage with customers extensively if they owe them money. That approach also contrasts with the provision of new powers to recover deductions from the bank accounts of individuals no longer in receipt of benefits and who are not engaging with the system. In these cases, the legislation would provide for an opportunity to make representations on affordability and hardship, before the deductions begin.

By requiring the Secretary of State to give notice and invite affected persons to make representations on affordability, the amendment seeks to ensure that equivalent protections are put in place for the recovery mechanism that applies to those who continue to be in receipt of benefits. As far as the limitation period is concerned, the new subsection would require that a recovery must commence before the expiration of a six-year period from the date on which the recoverable amount was paid. Currently, no such restriction applies, which means that individuals can face recovery action for overpayments that are many years old—and of course, in those cases, people will often not be able to locate records.

I understand that the Government are sympathetic towards the objectives of our amendment but still have concerns. We have addressed at least one of those concerns in the version of the amendment that has been tabled; that concern related to the way in which we had formulated the subsection on limitation. But I understand that the Government have a wider concern: the Minister explained in particular that, in a complex system such as welfare, there is a risk of unintended consequences once any new statutory provision is put into operational effect. I know that she speaks from depths of experience and from a sincere commitment to make the system fair and efficient.

Given that we have agreement on first principles, if in her reply the Minister is not inclined to support this amendment in its current terms, I hope that she might consider a Third Reading amendment that reflects the Government’s concerns—although I echo the concern of the noble Lord, Lord Vaux, about the very limited time we have before Third Reading. If the Government are not inclined to bring back a Third Reading amendment, can the Minister reassure us in two critical respects: first, that the Government agree with the objective of giving people in receipt of benefits a fair chance to discuss an affordable repayment plan rather than applying the automatic deduction of 15%? Secondly, can the Minister outline concrete alternatives to the statutory provision that we have proposed whereby this objective might be achieved? One solution might be the setting up of a task and finish group within the governance structure of the current review of universal credit to work through the technicalities.

Again, I am very thankful to the Minister for her exemplary engagement with us on this amendment. With that, I beg to move.

[Baroness Lister of Burtersett (Lab)]

My Lords, I start by thanking the noble Lord, Lord Verdirame, for tabling this amendment, which, as he said, follows up on the one I tabled in Committee, to which he spoke so eloquently. I too thank my noble friend the Minister and her officials for the very useful meeting we had recently and the Public Law Project for all its help.

Through the universal credit system, the Government determine the minimum amount that people and families need to live on. As has been evidenced by the Joseph Rowntree Foundation, for many that amount is not sufficient to meet their essential needs. As acknowledged by the DWP’s own policies, any deduction that takes people below that amount will result in hardship.

A Public Law Project survey of 500 people who had deductions applied found that a third of respondents became destitute as a result. Some 97% of Citizens Advice advisers reported that overpayment or advance loan deductions negatively affect people’s ability to afford essentials, while analysis by Policy in Practice found that, in addition to lowering income, deductions increased income volatility,

“making it harder for low income households to budget and plan ahead”,

with

“far reaching consequences, particularly for housing affordability and the risk of homelessness”.

The need to address the impact of deductions on poverty and financial instability was recognised by the Government at last year’s Autumn Budget, when they introduced the fair repayment rate. This move, which reduced the maximum amount that can be taken from someone’s universal credit payment to repay debt from 25% to 15%, was very welcome, but it is not enough to address the issues associated with overpayment recovery. The 15% rate is the rate that already applied for recovery of overpayments where individuals do not have earned income. Further, while it is helpful to have a maximum cap, it is not a substitute for assessing what constitutes an affordable rate of repayment for individuals.

A recent report from the Money and Mental Health Policy Institute, while welcoming the fair repayment rate, expressed concern that the 15% rate would continue to drive hardship. Its research found that the current system for overpayment recovery

“disproportionately affects people with severe mental health conditions … who are eight times more likely to have been overpaid benefits”.

The result, the charity says, is

“serious financial and psychological harm for many people already struggling with money and mental health problems”.

One research participant commented on the deduction, saying,

“some days I have been not eating because I can’t afford to, which is leaving my mental health in tatters”.

--- Later in debate ---

Finally, I am not able to say to the noble Lord, Lord Verdirame, that we can come back to this on Third Reading. It is the Government’s view that, given the significant legislative complexity, this is best handled through operational improvements rather than legislation. We need flexibility, and enacting this through legislation could create all kinds of unintended consequences due to the complexity of benefit calculations. I hope that the reassurances I have given the noble Lord have been enough, and I encourage him to withdraw his amendment.

[Lord Verdirame (Non-Afl)]

My Lords, I thank all noble Lords who have spoken. I will not press this to a vote, so the Whips do not need to worry. Instead, I would like to make a few points.

My first point is about the complexity of setting out to claimants the deduction rate. I hear what the Minister said, but it does not entirely reassure me. I believe that, as a matter of basic fairness, however complex certain calculations are, the Government should, just like commercial enterprises, be able to set them out in as simple a way as possible to the beneficiaries—the claimants.

My second point is that the way we crafted the amendment—the comprehensive provision on fairness in proposed new subsection (8)(b)(ii)—was precisely designed to distinguish fraud cases from other cases. However, as the right reverend Prelate the Bishop of Leicester said, the vast majority of these debts are actually due to official error; that is mainly what we are dealing with. Of course, it would have been possible to exclude the recovery of debts from overpayments due to fraud from the scope of the amendment.

Limitation periods are very important in any legal system because they are about both fairness and efficiency. Given the mountain of overpayments that various reports have pointed to, a system that does not have a cut-off time will continue to repeat those same mistakes. It is therefore about efficiency as much as fairness.

With that in mind, I am grateful to the Minister for the reassurances she has given. They go to two critical elements: clarity of communication with affected individuals, and timeliness. I hope that she will pursue those two objectives as much as she can within the policy, because it is absolutely necessary that people are told about these deductions before they actually begin. They have to be told clearly what the deductions will be, and as soon as possible—ideally, quite a bit before the deductions begin. With those assurances in mind, I beg leave to withdraw the amendment.

Amendment 109 withdrawn.