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6.12 pm
Ms Liz Lynne (Rochdale): I shall not detain the House for long. The Bill is minor and technical and extremely necessary to claw back the money that has been obtained through fraudulent claims or by people misrepresenting the facts.
Although I cannot criticise the Bill, we must find out what will happen when overpayments have resulted mainly from official error. I should like some clarification on that. I do not honestly believe that such money should be taken back because, obviously, if somebody gets a giro cheque through the door, they will spend it. Since they have not fraudulently claimed or misrepresented the facts in their opinion, they will obviously believe that they are entitled to that money. I should like the Minister to confirm that he does not expect that money to be clawed back from genuine claimants.
While we are talking about overpayments, I should also like the Minister to address the fact that the Department of Social Security has overpaid income support by £540 million in the past year alone, mainly because of official error. I should be grateful if, when he replies, he would say what action is being taken to ensure that overpayments do not continue.
The Benefits Agency report for 1994-95 about the accuracy of income support payments makes very depressing reading. I understand that accuracy is getting worse. In 1991-92, 95.7 per cent. of payments were accurate, but, in 1994-95, 86.6 per cent. were accurate. What action is the Minister taking to ensure that that does not continue? It is not surprising that the National Audit Office has highlighted the poor performance and the difference between different benefit offices across the country.
Mr. Roger Evans:
By leave of the House, Madam Deputy Speaker. I should like to thank the hon. Members for Manchester, Withington (Mr. Bradley) and for Rochdale (Ms Lynne) for their welcome for the Bill. I shall deal quickly with the four points that have been put to me.
I confirm to the hon. Member for Withington that the jobseeker's allowance is on course to be delivered properly in October. I can also confirm that claimants can appeal against the decision to review and the later decision to recover overpayments.
I should explain to the hon. Member for Rochdale that overpayment because of official error is a topic distinct from the subject of the Bill. I shall explain why in a moment. The important thing is that section 71 of the Social Security Administration Act 1992 concerns overpayments that have been caused--this is crucial--by misrepresentation, a positive act that is fraudulent or a failure to disclose when there is a duty to disclose.
Under the section 71 mechanism, which we are putting right in the Bill, there must be some form of culpability on the part of the claimant--he must have misled us or failed to tell us something that he ought to have done. That is distinct from when, because of official error, more money is sometimes paid than ought to have been paid. There is a discretionary scheme to compensate in circumstances of official error, when it may be necessary to satisfy the Benefits Agency that an official error has been made and, as a consequence, loss has been suffered.
Ms Lynne:
I understand that the Bill is very tightly drawn, but I was hoping that the Minister would state categorically that, if overpayment was due to official error, the money would not be clawed back.
Mr. Evans:
As a general proposition, that is far too wide. I suppose that some culpability on the part of the claimant and an official error could occur at the same time. To operate the Bill's section 71 mechanism, overpayment must be caused by misrepresentation or the failure to disclose; so, we are talking about something very different. Of course, when official error occurs, it is obviously important that people could be misled by a mistake by the Benefits Agency. The scheme to compensate in such circumstances bears all circumstances in mind, including official error.
The other point that the hon. Member for Rochdale put to me concerned errors in income support. Although that is a much wider topic than the Bill, I should stress that the change programme that we are considering is designed to address such concerns, which we accept merit serious debate. I commend the Bill to the House.
Question put and agreed to.
Bill accordingly read a Second time.
Motion made, and Question put forthwith, pursuant to Standing Order No. 61 (Committal of Bills),
Mr. Bradley:
I beg to move amendment No. 3, in page 1, line 7, at end insert--
The Second Deputy Chairman of Ways and Means (Dame Janet Fookes):
With this, it will be convenient to discuss also amendment No. 4, in page 1, line 7, at end insert--
There is a slight printing error in amendment No. 4 to which I ought to draw the attention of the House. The words "or negligent" should have been deleted.
Mr. Bradley:
Thank you, Dame Janet; I am grateful for your clarification of the fact that the words "or negligent" should have been removed from amendment No. 4.
The main purpose of amendment No. 3 is to reverse the effect of the Court of Appeal decision in the case of Jones v. Chief Adjudication Officer in 1993. The background to that decision is that there are two situations in which a claimant may have to repay an overpayment of benefit under section 71 of the Social Security Administration Act 1992.
The first arises when a claimant has misrepresented a material fact; the second when he has failed to disclose a material fact. Case law has held that the threshold for the Department is lower for the misrepresentation limb than for the failure to disclose limb. In essence, all that the Department has to prove is that there has been a misrepresentation, and that the claimant knew that the misrepresentation caused the overpayment in question. Whether the claimant knew the fact in question is immaterial, and so is the reasonableness of his behaviour. The test is one of strict, if not absolute, liability.
However, the failure to disclose limb provides some limited protection for claimants. The case law, which largely draws on insurance case law, has held both that the claimant must know the fact in question, and that disclosure of it must have been reasonably expected in the circumstances. In other words, a claimant cannot disclose a fact that he does not know, and should not be penalised for not having disclosed a fact that a reasonable person would not think had any impact on his benefit entitlement.
In the Jones case, the claimant had signed the standard form giro declaration to the effect that he had correctly reported all the facts that might affect his benefit entitlement. The Department of Social Security argued that the declaration constituted a representation, so that if the claimant had not reported or disclosed all material facts he was guilty of a misrepresentation.
Consequently, whether the claimant knew the fact, and whether disclosure was reasonably to be expected in the circumstances, was irrelevant. In other words, the declaration converted what would otherwise have been a failure to disclose into a misrepresentation too, so the protection associated with failure to disclose was thereby lost.
The majority in the case accepted that argument in part. It was agreed that there was a conversion, and it was said that although there was a reasonableness in the claimant's actions, that was irrelevant. However, the claimant did have to know the fact in question.
In a later case, Franklin v. Chief Adjudication Officer, in 1995, the Department argued that knowledge in itself was also irrelevant in conversion cases. That argument was decisively and unanimously rejected by the Court of Appeal. There are suggestions both in the Franklin case and in the minority judgment in the Jones case that the giro declaration may be unlawful, given that it has the consequence found by the majority in the Jones case.
The reference to the claimant's mental state is designed to reverse the effect of a commissioner's decision, CA/303/92, that mental capacity is relevant to the question only when the claimant knew the fact in question, and not to the reasonableness or otherwise of disclosure. That inevitably brings about injustice for an especially vulnerable group.
Amendment No. 3 therefore seeks to do three things. First, it seeks to confirm that knowledge is an essential ingredient in all failure to disclose cases. Secondly, it is intended to restore the law on the reasonableness of the claimant's behaviour to the pre-Jones position, even in conversion cases. Thirdly, it would stipulate that, in the consideration of whether disclosure was reasonably to be expected, account should be taken of the claimant's mental state.
The amendments represent a modest proposal. With the possible exception of amendment No. 3, they would simply restore the law to what everyone thought it was until 1993, and reintroduce some fairness into an otherwise harsh overpayments regime.
Amendment No. 4, too, is intended to introduce some equity into the overpayments regime. Where a claimant has acted innocently, it seems unfair that he should have to repay benefit overpaid over what may have been a very long period. Inevitably that can cause hardship, especially if the claimant remains on benefit.
Benefits law is extremely complicated; I think that everyone in the House accepts that. So long as a claimant acts in good faith and does his best to give the Department the information that it needs, there should at least be a cap on his overpayment liability. When a claimant is wrongly denied benefit, he can usually be paid arrears dating back only 12 months. The amendment simply provides some balance between the claimant and the Department in terms of benefit decisions later found to be wrong.
That the Bill be committed to a Committee of the whole House.--[Dr. Liam Fox.]
Question agreed to.
'(1A) The following subsection shall be inserted after subsection (1)--
"(1A) A person shall only be taken to have failed to disclose a material fact within subsection (1) if
(a) he knew the fact in question; and
whether or not the failure also constitutes a misrepresentation of a material fact within subsection (1).".'.
'(1A) At the end of subsection (1), there shall be inserted "; so however that, in a case where the misrepresentation or failure in question was not fraudulent, or negligent, the Secretary of State shall only be entitled to recover the amount which is referable to the 12 months immediately preceding the determination".'.
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