Examination of Witnesses (Question Numbers
60-79)
DEPARTMENT FOR
WORK AND
PENSIONS
Q60 Dr Pugh: Every referral is followed
through so there is no "we will not look into this"
or "we are not bothering with this" or "we will
cut it down a bit to make our work more manageable" or anything
like that?
Mrs Sheridan: Every referral is
calculated as an overpayment. Decisions are made whether it is
recoverable or not and the ones that are recoverable we pursue.
Q61 Dr Pugh: I want to ask a question
rather similar to Mr Davidson's, with a different intent really.
Clearly there are going to be differences from one paying agency
to another. In certain areas there will be more referrals than
in other areas and presumably there is a geographical distribution
in this that we could actually look at and you could supply. Is
that the case?
Sir Leigh Lewis: We do not have
that information to hand and it is not in the Report to be plucked
from it so we will try to see if we can give the Committee some
information on the geographical distribution of our debtors.[7]
Chairman: Thank you, Dr Pugh. Austin
Mitchell?
Q62 Mr Mitchell: I see from 3.20
that there are some 214,000 debts to the value of £205 million
placed with private sector collection agencies. Why do you use
private sector collection agencies? Are they nastier than you
or more efficient than you or more competitive?
Sir Leigh Lewis: We certainly
do not believe that either we or they are nasty and we ensure
that the standards that they follow are ones which we would absolutely
want them to follow and are acceptable. As John Codling said when
he gave some figures for the amounts they have recovered, there
is no huge differential between their relative performance and
ours, so why do we use them?
Q63 Mr Mitchell: What is the point?
Sir Leigh Lewis: The point is
they are recovering extra debt. That is the first thing.
Q64 Mr Mitchell: You mean you are
giving them ones you have failed on?
Sir Leigh Lewis: Yes exactly.
What we do is at a certain point we conclude that we are not having
success in recovering this debt. We may not be having success
in even identifying the location of the debtor and we pass many
of those debts to the private sector. If you just look at the
period since 2004-05 they have recovered just over £30 million
in that period, not a vast amount but a significant amount worth
having at a cost of around £7 million so it is clearly a
net benefit. As I said to the Chairman, one of the things I want
to do in the review that I have described is to look at whether
we are using them too much or not enough, because I am not sure
that I am persuaded yet that we have got the balance exactly right.
Q65 Mr Mitchell: You must be coming
to the conclusion more frequently that you are not going to get
the money when you pass it on to them because on table 15 the
number of recoveries they undertook went up from 2.7 million in
2005-06 to 8.7 million in 2006-07. You give them a lot more cases.
Why is that? Are you coming to the conclusion more frequently
that you cannot do the job?
Sir Leigh Lewis: I know it may
be becoming a slightly repetitive theme but we are doing the job
increasingly effectively. This is an area where I just do not
believe that we should be trying to do it entirely on our own.
Again from what we know of the financial and retail sector the
pattern is quite common that an internal debt operation will seek
to recover debts but the organisation will also use private sector
organisations for cases where they just believe that they have
got to the end of the road.
Q66 Mr Mitchell: How do you decide
what is to be passed on to them? Is it a block of work? Do you
say we have reached the end of the road on this and passed that
lot on? Are they under contract—success or no payment—or
whatever?
Sir Leigh Lewis: We have five
but we are going shortly to be reducing to four providers. They
are absolutely paid on an outcome basis so their payment depends
on the amount of debt they recover. The basic test, although I
am going to pass over to Carol Sheridan in a moment, is where
we believe we are unlikely to be able to make much further progress
ourselves that we will move to put those debts in the hands of
a private organisation.
Mrs Sheridan: Yes, that is correct.
We try and work the debt as far as possible in terms of contacting
people or negotiating with them. If we do not have that success
then there is a point in our process where we pass them over to
our private sector suppliers.
Q67 Mr Mitchell: You should come
to a deal with them. This is the only sector of employment that
is going to be increasing in the next year. Why not tell them
you will give them more business if they will take on more of
your cases—employ them I mean. That is a joke. Do not bother
to answer it. Why are there over 100,000 people with four or more
debts? How can that arise?
Sir Leigh Lewis: I think it can
arise because just going back to what some colleagues have already
said, we have a very complex benefits system and people cycle
on and off that benefits system so the opportunities to get into
debt are not simply once in a lifetime, if you see what I mean.
People may accumulate debt at a number of stages during their
time on the benefits system.
Q68 Mr Mitchell: Of that 100,000
what proportion is in the process of recovery? You must be initiating
action to recover some of the earlier debts from those who are
accumulating later debts?
Sir Leigh Lewis: We basically
seek to recover the oldest debts first. I wonder if Carol can
help on that.
Mrs Sheridan: We have a single
debtor view so for people with more than one debt we have a total
but in terms of accounting for that debt into the system we offset
repayments against the oldest debt first.
Q69 Mr Mitchell: Okay. When and how
is debt discovered? At what stage in the process does it come
to light, "Oh my God, we have overpaid these people"?
Sir Leigh Lewis: It can vary hugely.
At one complete end of the spectrum which of course does sadly
happen many, many times, somebody dies and if they are on a pension,
almost by definition—
Q70 Mr Mitchell: It sounds very accidental!
Sir Leigh Lewis: Almost by definition
that goes on in payment for a period until we are notified of
the death and so that is at one end. The other is where we simply
identify through all of the checks in the system, and there are
huge numbers of them, that a case includes an error, and at that
point normally we seek to recover that error. It is as simple
as that.
Q71 Mr Mitchell: Is that the stage
at which you also discover underpayments?
Sir Leigh Lewis: Yes, absolutely.
Q72 Mr Mitchell: Are they more numerous
than overpayments?
Sir Leigh Lewis: No, again within
the overall bounds of our work on fraud and error we know the
level of underpayment in the system and while it is about 2% of
benefits being overpaid either through fraud and error—and
I will check this figure out and I will write to the Committee[8]—from
memory it something under 1% that is being underpaid, but it is
absolutely the case that if our checks of all kinds reveal an
underpayment we will not only put that right but we will seek
to pay any arrears that we owe.
Mr Mitchell: Okay. What are we to expect
in the coming months? The economy is going to get worse, unemployment
is going rise, there are going to be more claims. Is this going
to cause a bigger debt problem for you?
Chairman: Is this an official announcement?
Dr Pugh: You are not on message!
Q73 Mr Mitchell: I am not on benefit
either! You can imagine that people are going to be strapped for
cash and will therefore find more difficulty in repaying debt.
You can also imagine that since they will be on benefit for longer
periods the process of recovery is going to be easier because
you can recover it more easily from people who are on continuous
benefit.
Sir Leigh Lewis: One thing we
are certainly beginning to see is that the amounts that we are
able to recover have become somewhat smaller over the last 12
months on average. That may indicate that more people are finding
it harder to manage with the monies they have, if you see what
I mean.
Q74 Mr Mitchell: So you expect the
debt situation to get worse, do you?
Sir Leigh Lewis: Even with that
we are still aiming to recover more debt this year than last year.
We are still aiming to recover our highest level of debt ever.
In the first six months of this year we have recovered up to the
end of September about £143 million, that is ahead of the
comparable period last year, largely because we are being successful—a
theme we have covered a number of times—in getting a much
higher proportion of those debts that exist referred to us and
into the recovery process.
Q75 Mr Mitchell: I see that while
24% of benefit debtors made a payment—and Mr Davidson has
covered this issue—61% of off benefit customers with a debt
at 21 September 2008 have never made a payment at all since the
debt management scheme was introduced. Why is that?
Sir Leigh Lewis: I think it reflects
that this is hard, if you see what I mean. Again I will turn to
Carol Sheridan in a moment. Where you have people who are off
benefit you have got to do a number of things. You have got to
be able to actually identify them, be in touch with them, contact
them, trace them and then you need to seek to arrive at a repayment
agreement with them either in a single payment or over a period
which they repay. We do take enforcement action. We took out some
500 enforcement orders during the course of the last year, so
we certainly will be tough where we can be, but this is quite
difficult in a society of our complexity.
Q76 Mr Mitchell: I see that you raised
the write-off level from 40 quid to 65 quid. Is that likely to
be raised again in the near future? It corresponds presumably
to your costs in recovery and those must be rising?
Sir Leigh Lewis: It had been a
fair amount of time, subject to correction, since we had looked
at that limit so it was the first time we had raised it for a
while.
Q77 Mr Mitchell: Would it not be
more straightforward to increase that level and concentrate your
efforts on the third of debt which is over £10,000 per person?
Sir Leigh Lewis: Two things on
that. Firstly, I think we should, absolutely, and that is why,
stimulated by this Report, we have set up within the team a Large
Debtors Recovery Unit because I think that makes sense to do.
Actually because we think that £65 is about the dividing
line above £65 we do think it is cost-effective to seek to
recover those debts.
Mr Mitchell: Okay, thank you.
Chairman: I think Mr Davidson has a couple
of supplementaries.
Q78 Mr Davidson: Can I just ask about
take-up rates because one of the difficulties again is the question
of people not taking up benefits. To what extent does the campaigning
particularly against fraud and the publicity around that actually
reduce take-up?
Sir Leigh Lewis: I very much hope
not actually because the whole set of our anti-fraud campaigns
is absolutely not directed at people—
Q79 Mr Davidson: I understand that.
I just wondered whether or not there was any evidence where maybe
you have been pursuing particular anti-fraud strategies in particular
areas as distinct from others and noticed that there was a difference
in take-up rates that followed on from particular initiatives?
Sir Leigh Lewis: Certainly because
we have evaluated all of our anti-fraud campaigns very thoroughly
and I do not have that information literally to hand—
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