Conclusions and recommendations
1 Benefit debt has risen from £1.67 billion
in 2006-07 to £1.85 billion in 2008-09.
The Department attributes this increase to improvements in its
processes for identifying and referring overpayments for recovery.
Most debt arises when people's circumstances change, such as when
they get a job which reduces their entitlement to benefits. Starting
with Income Support, the Department should urgently pilot new
interventions such as texting customers, messaging, phone contact
and web-based advice to remind them of the need to inform the
Department of any changes in circumstance which may affect entitlement.
2 Around 70% of benefit error arises from
the payment of Income Support, which has a high volume of large
overpayments and a limited level of post-payment review checks.
As a priority, the Department needs to review its procedures for
validating and reviewing Income Support claims, and should consider
introducing a three-tiered investigation programme, whereby a
proportion is selected for desk review, a proportion for a local
visit and a proportion for a delayed visit, say, after three or
six months. The Department should also, as a matter of urgency,
identify which other benefits are most susceptible to error and
overpayment and put in place measures to resolve recurring problems.
3 Nearly half the debt, some £900 million,
is owed by debtors with multiple debts. Over 100,000 customers
have four debts or more and a third of all debtors owe £10,000
or more. The Department has introduced
new initiatives such as encouraging debtors to pay off debts in
lump sums, has set up a Large Debtors unit and is working closely
with HM Revenue and Customs to focus attention on claimants with
the largest debts. The Department should set targets to reduce
the debt owed by customers with multiple and high value debts,
monitor its performance and report annually on its success.
4 The Department has not analysed its customers
to identify those groups who are at greatest risk of overpayments
which result in them owing money back to the Department.
As recovering debt is both slow and difficult, preventing customers
getting into debt in the first place is key to reducing the level
of debt in future. The Department should develop a means of analysing
its customers by risk to improve the effectiveness of its debt
prevention work and so reduce the amount of error entering the
system.
5 The absence of a government-wide register
of debts and debtors results in duplication of effort across central
and local government. We recognise that
creating such a register would be an expensive and difficult undertaking.
However, the Department should take the lead, working with the
Treasury, other departments and local authorities, in identifying
how it could share information and collaborate more effectively
with other parts of government in managing and recovering debt.
6 The Department does not have a target for
repayment from 'off-benefit' debtors—those no longer claiming
benefits—and the repayment rate has been low, with just
24% making payments for the year ending 30 September 2008.
As part of its implementation of the Combined Single Work Queue
in 2010, the Department should set itself targets to manage overpayments
more effectively for those customers who regularly move on and
off benefit. It should also benchmark its performance against
other organisations engaged in debt recovery.
7 The Department wrote off £9.2 million
in debts from small overpayments in 2007-08 as a result of its
write-off policy for debts below £65.
The Department should keep this threshold under regular review
and should identify an appropriate write-off level for each type
of overpayment, taking into account the cost and likelihood of
recovery.
8 The Department has not fully explored the
option of selling off all or part of its uncollectible debt to
a third party. The Department must also
provide adequate safeguards to protect vulnerable individuals
from over-aggressive recovery actions from third parties acting
on its behalf.
9 The Department's ongoing review of the way
it conducts its business covers write-off
policy, the feasibility of selling off debt to another organisation
and the possibility of incentivising people, particularly those
who are 'off-benefit', to pay off their debt in one go. To improve
its intelligence and management of overpayments, the Department
should extend the review to include: benchmarking with public
and private sector organisations; risk profiling; and analysis
of the regional spread of indebtedness and its causes.
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