Public Authorities (Fraud, Error and Recovery) Bill (Twelfth sitting)

Debate between Siân Berry and Rebecca Smith

Committee stage
Tuesday 18th March 2025 Public Bill Committees

[Siân Berry (Brighton Pavilion) (Green)]

I beg to move, That the clause be read a Second time.

It is a pleasure speak under your chairship again, Mr Western. I tabled the new clause as a probing amendment. In short, it would bring the test for the recovery of universal credit overpayments caused by official error into line with regulation 100(2) of the Housing Benefit Regulations 2006, meaning that they could be recovered only where the claimant could have reasonably been expected to realise that there was an overpayment.

Let me provide some background on why the new clause is needed. According to Department for Work and Pensions data, in 2023-24 the best part of 700,000 of the new universal credit official error overpayment debts entered into the DWP’s debt management system were caused not by fraud or claimant error but by Government mistakes. Unlike for many other benefits, the DWP can recover official error universal credit overpayments from claimants. This power was introduced through the Welfare Reform Act 2012, and represented a significant change to the position that previously applied to most legacy benefits.

When concerns were raised at the time, assurances were provided by the then Employment Minister that the DWP did

“not have to recover money from people where official error has been made”

and that

“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.]

However, Public Law Project research shows that the DWP’s default approach is to recover all official error overpayments. Relief is dependent on individuals navigating a difficult and inaccessible process to request a waiver. In 2022, only 26 waiver requests were granted.

DWP mistakes matter. The financial and psychological impacts of overpayment debt recovery on individual claimants can be severe. The research I have mentioned found that the recovery of debts, including official error overpayments, by deductions from universal credit led to a third of survey respondents becoming destitute. The risk of harm is particularly acute for official error overpayments, which individuals have no way of anticipating, so they can lead to sudden, unexpected reductions in income that impact existing fixed commitments and carefully planned budgets.

The recovery of official error overpayments brought an added sense of injustice, with individuals finding themselves in debt due to a DWP error over which they had no control. For example, one claimant was overpaid universal credit because the DWP had failed to consider income from her widow’s pension. She had informed the DWP that she received it and was assured that it would not affect her claim. She relied on that assurance and spent the money on daily living expenses. Four years later, the DWP told her that it would be recovering the resulting overpayment of £7,258.08. Aside from the significant financial impact, the stress associated with recovery impacted her mental health. She found herself constantly thinking about the overpayment and how she would pay it back, which in turn impacted on her physical health. She was left anxious that mistakes would be made again, leading to her incurring debt that she had no power to avoid.

Recovery often puts individuals who have relied on payments in good faith in financially precarious situations, forcing them to make difficult choices about sacrificing essentials. Research by the Joseph Rowntree Foundation has found that the current standard universal credit allowance is not sufficient to cover the cost of essentials. In this already difficult context, households that are repaying overpayment debt can lose up to 25% of their standard allowance each month.

People often base key life decisions and financial planning on information provided by DWP officials about their entitlement to universal credit. An official error universal credit overpayment can also have a knock-on effect on people’s entitlement to other support, such as council tax reduction. I am sure the DWP does not want to be responsible for pushing someone into further financial hardship. We can prevent this harm from occurring in the first place with my new clause, which would mean that overpayments can be recovered only where the claimant could reasonably have been expected to realise that they had been overpaid.

The new clause is equivalent to an amendment proposed by Labour Front Benchers during the passage of the Welfare Reform Act. Under the new clause, DWP officials would themselves consider the fairness of recovering an official error overpayment before any recovery was initiated. Increasing protections against the recovery of overpayments would also create a strong incentive to reduce the rate of DWP errors in the first instance, thereby contributing to a more accurate and better functioning welfare system from the outset.

The Bill provides the Government with an opportunity to proactively address a harmful and unfair process that affects hundreds of thousands of claimants each year, easing the financial burden of debt on claimants who have done nothing wrong and encouraging the DWP to get payments right first time. I hope that the Minister will respond to my points on new clause 1, and I sincerely hope that we will make progress on the issue as the Bill progresses.

[Rebecca Smith (South West Devon) (Con)]

It is a pleasure to serve under your chairmanship, Mr Western. This is the first time that I have spoken to a new clause in Committee. New clause 1, tabled by the hon. Member for Brighton Pavilion, would amend the Bill so that, where universal credit overpayments have been caused by official error, they can be recovered only where the claimant could reasonably have been expected to realise that there was an overpayment.

I am interested to know how the claimant could reasonably be expected to realise that the amount that they had received was an overpayment, as that would be the test for whether that person becomes liable for repaying the amount. If payments are made to an appointee’s bank account, do they become liable for spotting the overpayment under this new clause? Would the amount have to be repaid only if both the person eligible for the payment and their appointee realised the overpayment?

Are there figures on how much money is lost and recovered due to error? Do we therefore know how much the new clause would cost the DWP? Underpayments in taxes are recovered by His Majesty’s Revenue and Customs in the following months or years even where the individual is not at fault, and it is not clear why universal credit claimants should be any different. It would help if the Minister could explain to the Committee how, in the case of overpayments, a repayment plan will be put in place that is manageable for the person making the payments, and how that will be assessed.

We would be better off focusing on minimising official errors in the first place. What work is the DWP doing to better guard against overpayments, given that the overpayment rate for universal credit was 12.4% or £6.46 billion in the financial year ending 2024, compared with 12.7% or £5.5 billion in the financial year ending 2023? I argue that we need to focus on ensuring that overpayments are not being made, but once the error has been made, particularly because it is so costly to the taxpayer, we should try to ensure that the money is recouped.

Public Authorities (Fraud, Error and Recovery) Bill (Tenth sitting)

Debate between Siân Berry and Rebecca Smith

Committee stage
Tuesday 11th March 2025 Public Bill Committees

[Siân Berry]

Would the hon. Member care to comment on the fact that in clause 12, actual fraudsters are given the option to either have a court agree, or for them to agree to repay the amount?

[Rebecca Smith]

In terms of the Cabinet Office powers that we debated under part 1 of the Bill, I think we are not comparing apples and apples; we are comparing apples and pears. I am not the Government, so it is not my Bill, but ultimately we have heard the figures—indeed, I have shared the significant amount of fraud we are talking about—and if I were in the Minister’s shoes, I would say that the number of cases is not comparable. I continue with my view that this is different from the first part of the Bill.

I would be interested to hear an explanation from the hon. Member for Brighton Pavilion about why she does not believe that money that has been fraudulently claimed from the DWP should be paid back. However, I have a question for the Minister off the back of amendment 7, which is similar to the question I asked him about clause 89. Regarding the concerns about the definition of hardship and vulnerability that the hon. Member for Brighton Pavilion mentioned, what might those levels be? I appreciate that that is potentially difficult to include in the Bill, but it would be interesting to know what is defined as a level of hardship that would have an impact on repayment, and how that would be determined.

[Andrew Western]

I will spend a moment setting out the process around the establishment of communications prior to deduction from a bank account and the affordability considerations that we undertake.

A person who is not paid under PAYE, or is in receipt of benefits, is identified and referred to the DWP’s debt management team initially to recover the debt. The debt management team makes multiple attempts, by letter or phone, to contact the person over at least four weeks to agree a voluntary repayment plan. If no contact can be made at that point, the case is referred to the DWP debt enforcement team, who will make at least four further separate attempts at contact, by letter or phone. That will include, at a minimum, two written notifications setting out the debt amounts owed, how the DWP may enforce the recovery of the debt, and with signposting to debt support to ensure that support is offered to vulnerable people.

If there is still no contact made, the person has repeatedly refused to engage and agree a voluntary plan. At that point, the DWP will check that the person has not made a new claim for benefit or entered PAYE employment, to check the person is suitable for this sort of recovery action. The person’s bank can then be contacted by the DWP to provide three months of bank statements from their accounts to check the affordability for any deduction, and to help the DWP work out the right amount, and frequency, of any deduction. The deductions must be line with caps in legislation. For regular deductions, that must not exceed 40% of the amounts credited into an account over the period for which bank statements are obtained. This will ensure that no one is forced to repay more than they can afford, so no one is pushed into financial hardship due to the recovery of debt.

Once that affordability assessment is complete, the DWP must write to the person to outline the debt that is being recovered—in other words, what has been overpaid and what is owed—the amount and frequency of the deduction, and how the deduction will be made, which in this case is from their bank account. The letter must outline the opportunities for the person to make representations to the DWP about any circumstances that the Department should consider before making the deduction, and it must also outline their right for the deduction decision to be reviewed. The person has a month to make representations or request a review. The letter must also outline appeal rights, including that if a person has made representations or asked for a review and the deduction order has been upheld, they may appeal the decision to the first-tier tribunal.

If there is no contact, one month after notifying the person of the proposed deduction the DWP will instruct the bank to deduct money, and repayments will be made directly to the DWP from the person’s bank account until the debt is repaid. That shows that it is quite a rigorous process, with a number of attempts to make contact with the person and a number of safeguards in rights to object and rights to appeal. In addition, for particularly vulnerable people, we have the vulnerability framework; part of that process supports people through referrals to advice services. We work with the Money and Pensions Service in particular, and frequently refer people to its services frequently.

For specific vulnerabilities and in particular cases, there is discretion to consider waiving the debt. That is unusual, but it is clearly an important safeguard for extreme cases—for instance, where domestic violence or financial coercion is involved. That is applied very much on a case-by-case basis; it is not a power or a policy that we would expect to use regularly.

I hope I have given the Committee an indication of the support and process for vulnerable people, and the number of humps in the road, as it were, before we get to the point at which we make a deduction.

Public Authorities (Fraud, Error and Recovery) Bill (Eighth sitting)

Debate between Siân Berry and Rebecca Smith

Committee stage
Thursday 6th March 2025 Public Bill Committees

[Siân Berry (Brighton Pavilion) (Green)]

I will press mine too.

[Rebecca Smith]

As we have just heard, clause 74 amends the Social Security Administration Act to give power to the Secretary of State to obtain information for the purposes of identifying incorrect payments of certain benefits. I think that is fairly self-explanatory, so I do not have any questions.

Schedule 3 provides further detail on eligibility verification measures, but what happens when people have an account with a bank or financial institution other than the one that DWP payments are made into? We talk a lot about linked bank accounts, but it is implied that one bank will be looking to see whether a person has multiple accounts. However, people have much more complicated lives.

How does the Minister intend to ensure that we not only look at the account into which the benefit is paid, so that the investigation is more thorough? Thinking specifically about National Savings & Investments—a Government account into which people save money—are we going to make sure that a person’s entire suite of bank accounts are included, or just the one into which the DWP pays money?

That leads me on to my amendments. As the official Opposition, we have tabled amendments 24 and 25 to schedule 3, relating to the scope of who may be subject to the legislation. I will also speak to the amendments tabled the hon. Members for Torbay and for Brighton Pavilion during my comments.

Amendment 24 would include within the scope of the Bill accounts held by a person appointed to receive benefits on behalf of another person. We have tabled that because it would mean that proxy accounts are not excluded and wider patterns of potential organised fraud could be monitored and prevented over time. Without that measure, we believe that it would be easy for fraudsters to deliberately evade monitoring.