Welfare Reform Bill

The Committee consisted of the following Members:

Chairs: Mr James Gray  , †Mr Mike Weir 

† Baldwin, Harriett (West Worcestershire) (Con) 

† Bebb, Guto (Aberconwy) (Con) 

† Buck, Ms Karen (Westminster North) (Lab) 

† Curran, Margaret (Glasgow East) (Lab) 

† Elliott, Julie (Sunderland Central) (Lab) 

Ellison, Jane (Battersea) (Con) 

† Elphicke, Charlie (Dover) (Con) 

Fovargue, Yvonne (Makerfield) (Lab) 

† Gilmore, Sheila (Edinburgh East) (Lab) 

† Glen, John (Salisbury) (Con) 

† Grayling, Chris (Minister of State, Department for Work and Pensions)  

† Green, Kate (Stretford and Urmston) (Lab) 

† Greenwood, Lilian (Nottingham South) (Lab) 

† Hollingbery, George (Meon Valley) (Con) 

† McVey, Esther (Wirral West) (Con) 

† Miller, Maria (Parliamentary Under-Secretary of State for Work and Pensions)  

† Newton, Sarah (Truro and Falmouth) (Con) 

Paisley, Ian (North Antrim) (DUP) 

† Patel, Priti (Witham) (Con) 

† Pearce, Teresa (Erith and Thamesmead) (Lab) 

† Sarwar, Anas (Glasgow Central) (Lab) 

† Smith, Miss Chloe (Norwich North) (Con) 

† Swales, Ian (Redcar) (LD) 

† Timms, Stephen (East Ham) (Lab) 

† Uppal, Paul (Wolverhampton South West) (Con) 

† Willott, Jenny (Cardiff Central) (LD) 

James Rhys, Committee Clerk

† attended the Committee

Public Bill Committee 

Thursday 19 May 2011  

(Morning)  

[Mr Mike Weir in the Chair] 

Welfare Reform Bill

9 am 

The Minister of State, Department for Work and Pensions (Chris Grayling):  On a point of order, Mr Weir. Good morning to you. I should like to draw the Committee’s attention to a mistake made by the office of the Secretary of State for Work and Pensions and to make members of the Committee aware, if they are not already, of his intention to hold further discussions on the child care support to be provided within universal credit. He intends to hold a seminar at 2.30 pm on Monday 23 May in Committee Room 18 to brief members of the Committee who wish to attend and to discuss plans for child care. The previous details were sent out in error, and I can confirm that the child care seminar will definitely be held on Monday 23 May, so that the Secretary of State can brief Committee members, as promised, before the end of the Committee. 

Clause 102 

Recovery of benefit payments  

Ms Karen Buck (Westminster North) (Lab):  I beg to move amendment 254, in clause 102, page 67, leave out lines 22 and 23. 

The Chair:  With this it will be convenient to discuss the following: amendment 255, in clause 102, page 69, leave out lines 19 and 20. 

Amendment 256, in clause 102, page 70, leave out lines 1 and 2. 

Ms Buck:  It is a pleasure to see you back in the Chair, Mr Weir. The amendments, and some of the others that we will discuss this morning, are probing amendments designed to find out a little more from the Government about how the rules governing overpayment will operate. They explore some of the changes that have been made—that, at least, is our reading of the Bill—in the philosophical approach to dealing with overpayments. 

Specifically, the amendments seek clarification about the wording of the clause, which implies that the Department for Work and Pensions will seek to recover overpayments from people other than the claimant to whom they were made. As currently constituted, the wording is very open and simply says that overpayments may be recovered from 

“such other person (in addition to or instead of the person to whom it was paid) as may be prescribed.” 

I do not think for a second that the Government intend that provision to be as wide-ranging in practice as it appears to be, but we would like to know a little more about their thinking. 

Obviously, the open way in which the clause is drafted potentially extends liability to other people in the household, such as a partner or a claimant’s adult child, and we would like to know a little more about the circumstances. Given the element attributable to rent payments in universal credit, there is also a real possibility that landlords will find themselves liable for overpayments. In many cases, they could have absolutely no knowledge of the individual’s circumstances. As we have heard, landlords have expressed concerns about many other aspects of the Bill, including what might happen to them where there are rent arrears. In this case, they may find themselves subject to proceedings relating to overpayments about which they know nothing. 

The clause may, however, open up another issue. There are beginning to be worrying signs that Members may, in some cases, even be taken to court by constituents seeking to sue them for giving advice that they did not believe to be correct. Some Members may have experienced that; my hon. Friend the Member for Hammersmith (Mr Slaughter), for example, found himself in that position, as did Members in the previous Parliament. As we know, Members of Parliament and councillors are not advisers; we are not trained as such and we do not present ourselves as such. None the less, we play a significant role in dealing with constituents who come to us for help and advice, and there has always been a risk, which is now increasing, that people who provide advice and assistance to individuals in good faith will find themselves liable. That area of law has yet to be tested, but I think it will be increasingly. 

There is a real possibility that DWP officials might find themselves liable if they make errors. If an official error leads to an overpayment that leaves the claimant at a disadvantage, the claimant might seek to take some form of action to recover the loss, or the Department might seek recovery from officials who may have been responsible for errors in benefit administration. It is most unlikely that that is the Government’s intention, but it would help the Committee if the Minister set out the intention behind subsection (2). When can we expect clarification on who will be included in the categories of people from whom overpayment will be statutorily required? 

Chris Grayling:  May I crave your indulgence, Mr Weir, and that of the Committee? Given that the shadow Minister has said that the amendments are probing, I hope that you will indulge me and allow me to comment on the clause as a whole and put the amendments into context. 

The clause will allow all overpayments of universal credit, jobseeker’s allowance and employment and support allowance to be recoverable. Similarly, all payments on account and certain hardship payments will be recoverable. The clause will ensure that overpayments of all other benefits remain recoverable, as they are now, but only in circumstances in which there has been a misrepresentation or failure to disclose. 

There will be an exception to the rule prescribed in the regulations for the housing credit element of state pension credit or housing credit itself. Regulations will prescribe, for example, that overpayments of housing credit will be recoverable if caused by official error and paid directly to a landlord, but not recoverable if paid to a pensioner. We intend to have clear rules that do not apply the same principles of recoverability to pensioners

as to people of working age. That approach is consistent with the way things operate today. We are taking this power to provide greater reassurance for older people on the circumstances in which overpayments will not be recoverable, which is the case for pensioners who are currently overpaid state pension credit. 

Although in practice most overpayments of universal credit—JSA and ESA—will be deemed recoverable, a decision could be made that the overpayment or part of it does not have to be repaid, allowing discretion for front-line staff. A code of practice will govern the circumstances in which action will be taken to recover overpayments, which will ensure consistent, considered decision making. We had to be careful, because things have been done wrongly in the tax credit system, for example, and we want to learn lessons from that. 

In the vast majority of cases, overpayments, payments on account and recoverable hardship payments will be recoverable from the person to whom they were paid. But such payments can also be recovered from any person who has been enriched by the overpayment. For example, a payment is recoverable from an appointee who appropriates excess benefit for their own use. Where a claimant has committed housing benefit fraud and the payment of housing credit has been made directly to the landlord, the payment will be recoverable only from the claimant. 

The clause sets out three specific methods of recovery: deduction from ongoing benefit, court action and adjustment of the benefit itself. We could use other methods of recovery, such as cash repayment or direct debit. Currently, we have to recover court costs, where there is a court judgment in our favour, separately from the recovery of benefit payments. The clause includes a new power to allow the streamlining of the process and to recover court costs by the same methods as the overpayment—for example, by deductions from benefit. Separate arrangements will no longer be needed. Recovery of hardship payments and payments on account can also be made by such methods. 

The hon. Lady has tabled probing amendments, so let me explain our thinking and walk her through what might happen in individual circumstances. Clearly, recovery of benefit payments has to be about protecting the public purse. If moneys have been overpaid or, in the case of hardship, payments on account have been paid on the basis of need, the norm would be that they are recovered. The trouble is that, if we limit recovery of recoverable benefit payments only to the person who received the payment, it prevents us recovering moneys paid in respect of a household if the benefit or credit is paid to a named payee. In a number of cases, there might be an issue. For example, if there is a change of payee in the household between the discovery of the overpayment and its recovery, we would be unable to make recovery by deduction from the benefit or credit. In some cases, that might be a deliberate act—the change of payee might be a way of avoiding a repayment obligation. 

If the amendment were accepted, fraudsters might be able to avoid repayment of fraudulently obtained moneys. A claimant might rent a home from a private landlord, to whom the rent was paid directly, for reasons that we have discussed. The claimant might leave the property and it might be discovered subsequently that the claimant had been making a fraudulent claim. The danger is that, under the amendment, it would be possible to

recover the money only from the landlord, who would be the innocent party. In effect, the fraudster would avoid repaying the overpayment and would get away with it. Landlords would be left with an unfair liability that was not of their making, and they would be unable to recoup the money unless they pursued the fraudster through the courts, assuming that they could afford to do so. We have taken powers to avoid such circumstances. 

In the case of a vulnerable person with a carer, we might be paying benefit into the carer’s account in the name of the vulnerable person, who is the actual recipient. If the carer proved to be a fraudster, did not pay the money to the vulnerable person and ran away it, in law, we could not go after the third party, because the money would be due to the vulnerable person. Our approach gives us the flexibility to pursue such cases. 

Discretion is important, because we want to avoid making a lone parent who has been abandoned carry the cost of money that was paid to the couple when the partner has run away with most of the money, and so on. That situation has occurred many times with tax credits. If we set in stone rules of the kind that the hon. Lady described, we shall prevent our being able to apply the rules to someone who has received the money fraudulently or who has acted fraudulently, which is why we do not want to enshrine the amendment in law. 

We will, of course, use discretion and common sense. A central part of our approach to the management of the system is to say to front-line staff, “Use common sense.” We will also have good, trained decision makers, who will apply common sense in situations of dispute. I hope that I have provided the hon. Lady with the explanation that she wanted. 

Ms Buck:  I am grateful to the Minister for his useful clarification and the examples he outlined, particularly those relating to fraudulent behaviour not carried out by the main recipient. It is absolutely right and proper for recovery action to apply in such cases. We do not disagree with that. The danger still remains, however, that discretion is always a double-edged sword. It is important to apply a degree of discretion and common sense, but it is equally important not to allow mission creep. Recovery from individuals other than the claimant should be the exception rather than the norm and should be rooted in fraudulent behaviour rather than error. 

As with some of the other issues that we have discussed in Committee, it is important to keep an eye on the numbers—the trend of actions that may arise from the measure—to ensure that officials are following the recovery process in such cases with proper caution. The Minister’s example was right. All those who have been MPs for some time will have dealt with matters relating to the benefit and tax credit systems, particularly those concerning abandoned wives and, sometimes, husbands who have been left with a debt liability. Even under the current rules, we have had difficulty in dealing with some of the trauma and debt that arise from those circumstances. We want to be reassured that, in future, such people will be protected, and we will be going for the genuine fraudsters. 

The Minister’s clarification was useful and we look forward to further guidance on the matter. I beg to ask leave to withdraw the amendment. 

Amendment, by leave, withdrawn.  

9.15 am 

Ms Buck:  I beg to move amendment 252, in clause 102, page 67, line 43, at end insert— 

‘(8) In prescribed circumstances, overpayments shall not be recoverable.’.

The Chair:  With this it will be convenient to discuss amendment 253, in clause 102, page 67, line 43, at end insert— 

‘(8) Official error overpayments of benefits by local authorities, HMRC or the Department of Work and Pensions, that occur when the claimants could not reasonably have been expected to know they were being overpaid, cannot be recovered.’.

Ms Buck:  I am grateful to the Minister for having spelled out on the previous group of amendments some of his thinking on the broad principle of overpayments. I shall address that thinking further and seek further clarification from him. The clause represents a change from the existing overpayment rules in the benefit system and will align the benefit system more closely with the tax credit model. 

The tax credit system was introduced by the Labour Government. I am enormously proud of it, because of the money it put into the pockets of low-income working households. None of us was proud of the problems of administration and overpayment that happened, particularly in the early years. There was a flaw in the system, which caused great difficulty for many individuals. Everybody who was in Parliament during those years will know instances of people suffering considerable hardship. In particular, people found it hard to understand where and why overpayments occurred, because of how tax credit payments are made over time. 

It is important that the Government explain how, in making the changes to the overpayment regime that will be introduced for universal credit, they will avoid the risk of the comparable overpayments problems in the tax credit system being extended to an even wider pool of people, who may be a poorer and more vulnerable group of claimants. 

As the Minister has confirmed, benefits overpayment recovery is prevented under current rules where a claimant has exercised due care and vigilance. That was introduced by the Social Security Act 1975, and it has been endorsed most recently by the Department for Work and Pensions guidance in 2006-07, which made it clear that non-recoverable overpayments are official error overpayments, either local authority or departmental, that occur when the claimant could not reasonably be expected to realise that they were being overpaid, and those overpayments cannot be legally recovered. 

Recoverability is permitted where overpayments arise because of the misrepresentation of facts or the failure by a claimant or anyone else to disclose a material fact. That is a just and fair test that has been in place for many years and has been tested in case law. Its purpose is to allow recovery of an overpayment that arises as a result of a claimant’s actions or failures, whether innocent or fraudulent. It protects the claimant in cases where the overpayment arises because of official error by the benefit authorities. That balance has worked well in the benefits system, but there was a flaw in the tax credit system. 

Like many members of the Committee, I have had cases in which claimants were told by the administering authorities that they were entitled to a benefit. They

received that information in good faith and, in many cases, in writing, on the basis of correct facts and supporting evidence that they had submitted. Having submitted correct information, most claimants—I would be among them if I filled in forms to apply for tax credits or housing benefit—believe in good faith that a payment is paid correctly, because they do not understand every detail of how benefits are worked out. 

As things stand, in such circumstances, advice sector lawyers or Members of Parliament can call a halt to mistaken enforcement resulting from official error and reasonable failure to know that an overpayment has occurred. That takes much of the pressure off vulnerable people who are in debt, while facts are collected and order is restored. However, the clause will allow recovery in all cases, regardless of culpability, which will unfairly alter the balance of responsibility in favour of the state. It might mean that a claimant is presented with a large bill for repayment, in some cases amounting to thousands of pounds, and possibly years after the circumstances that led to that overpayment, even though it was entirely due to the negligence of the benefit authorities. 

Charlie Elphicke (Dover) (Con):  If the hon. Lady will forgive me, my reading of the clause is that it is a regulation-making power about such other person as may be prescribed, and that it is very much a bookcase into which the books can be inserted. Arguably, she is prejudging a debate better held on the regulations. 

Ms Buck:  We are in Committee to do line-by-line scrutiny of the legislation and to test the Government’s intentions in all respects. In a number of debates, we have expressed concern that we are being asked to accept so much on trust and to look forward to regulations, which, in many cases, will be confirmed under the negative procedure. That balance does not necessarily allow for proper scrutiny. 

We accept the bookcase analogy, but where the Bill includes significant implied changes to the balance of responsibilities, as with overpayment, it is important for us to test the Government’s thinking. Why is the change necessary? Why is an alignment necessary for tax credits when such issues have caused problems in the past? 

Charlie Elphicke:  My interpretation of the regulation-making power is that it will build on regulation 147 of the Employment and Support Allowance Regulations 2008, which were laid before the House by the right hon. Member for East Ham. In that case, mention is made of “may” recover and all the facts and circumstances of the case; it seems the system has already shifted, and did so in 2008. 

Ms Buck:  The important organisations out in the community providing advice, assistance and representation to claimants have certainly expressed considerable concern about the presumptions underpinning clause 102, which seem to lead to a greater expectation of mandatory, automatic recoverability from the claimant. I referred a moment ago to the still extant DWP guidance, which makes it clear that the expectation in the benefits system is not for automatic recovery if claimants have acted in good faith, not been at fault or not caused the overpayment through their own actions. 

Ian Swales (Redcar) (LD):  Does the hon. Lady agree that it is dangerous to go down the road of relying only on discretion, which depends on individual behaviour and officers? We all deal with cases in which people are being hounded for money that was paid to them as a result of an administrative error—in one of mine, someone has repeatedly reported the administrative error and failed to get action from the DWP. 

Ms Buck:  The hon. Gentleman is absolutely right, and we have all experienced such cases. I am certainly not arguing that before May 2010 everyone lived in an earthly paradise, without administrative error or recoverability, which sometimes should not have been the case. 

In our experience with the tax credit system, a number of individuals were exposed to significant repayments, in some cases many years after the event or without understanding why, which caused a great deal of suffering and hardship. Similar cases occur in the benefits system and we must unpick them. However, in the legislation—the statutory framework and the regulations—we need to ensure that there is a proper balance. On the one hand, a degree of discretion is always necessary in a system, because the millions of transactions every year are so complex that it would be absolutely impossible to write a manual covering them all. On the other hand, guidance should be sufficiently robust to err in favour of the vulnerable and, by definition, very low-income claimants, if they are not at fault and if there is official error. 

Underpinning everything, of course, is the enormous difficulty that individuals experience when dealing with debt and, when at the absolute margins of financial sustainability, they find themselves with a debt they were not expecting and could not have predicted, and which was not their fault. There is now a considerable body of evidence to suggest that that level of debt is closely correlated with poor mental health. It can trigger poor mental health. It can tip individuals over into physical and, in some cases, mental illness. That is why the amendment is supported strongly by Mind and the Royal College of Psychiatrists, which want the Government to do everything in their power to ensure that individuals are protected from the consequences of actions that do not result from their own behaviour. 

The two amendments seek to press the Government harder. Where an overpayment has arisen as a result to fraudulent behaviour, we are completely at one in saying that it should be pursued vigorously. Where it has arisen as a result of error and misrepresentation on behalf of the claimant then, as we shall discuss later, a proper balance should be struck on the penalties that accrue. Where the overpayment has arisen through no fault whatever of the individual, the presumption should not be for automatic repayment. The implicit realignment in clause 102 is not necessary and needs to be justified by the Minister. I look forward to hearing from the Minister why he feels that realignment is necessary, and what the Government are able to do to protect vulnerable individuals from its consequences. 

Kate Green (Stretford and Urmston) (Lab):  I am keen to make a couple of additional comments following the arguments advanced by my hon. Friend. In a previous existence, I spent a lot of time on this subject in relation to difficulties with the recovery of overpayments of tax

credits. In fact, I think that at one point I was involved in legal action against the previous Government, which shows how even-handed I am in my concerns on this issue. 

As my hon. Friend said, the difficulties arose when we introduced tax credits. We began to introduce a methodology and attitude towards the recovery of the overpayments that came with the tax system. In some circumstances, it has borne down very harshly on particularly vulnerable benefit recipients vulnerable. As my hon. Friend said, that has already caused situations in which claimants have found themselves with literally thousands of pounds in overpayments—not with any ill-intent, fraud or misleading behaviour on their part, or even necessarily particular incompetence on the part of officials, but simply because rules have been misapplied and timings confused. At the end of the day, the claimant has to pick up the bill. As my hon. Friend said, that can cause stress and distress to claimants. 

We had a discussion a few days ago about being able to itemise the different components of universal credit. It will be more difficult for a claimant to be certain that there has been official error if they do not have sufficient information to assess the make-up of their awards. We saw that with tax credits—the information was not particularly comprehensible. The previous Government took many welcome steps to improve that information. As a result, the incidence of massive overpayment began to reduce substantially. However, universal credit is new territory for us, because it lumps everything into a single payment. 

A few days ago the Minister indicated that the Government were considering offering an itemised breakdown of each component of a universal credit payment. Clause 102 would be fundamentally and deeply unjust to claimants without such a breakdown, so I strongly urge the Minister to give us reassurances on that point. 

9.30 am 

Chris Grayling:  May I begin by saying that I agree with almost everything that has been said in this debate by Opposition Members and by my hon. Friend the Member for Redcar? Those of us who have been in the House in the past 10 years, and know about the issues and problems in the tax credit system, will share the concerns that have been raised this morning. I am absolutely clear that we must not make those mistakes again. There are some real issues around whether vulnerable individuals can or cannot be aware of the error that takes place when overpayments are made without their realising it, and they only discover afterwards that they have a substantial debt. We have to be really careful and sensitive about that situation. 

The real question about the clause, however, is whether it is sensible to establish safeguards in primary legislation that apply absolutes to a situation and which effectively say, “You can never do anything”. This is a case where I can give the Committee an absolutely clear statement of intent, because we have all learned the lessons of what has happened in the past, but I do not think that we should prescribe in all circumstances that money that has been paid in error cannot be recovered. That is the essence of what we will do in primary legislation. 

There is one big difference between universal credit and the experience of tax credits. Tax credits were based on an estimate of what somebody would earn, but often such estimates would bear no relation to what they actually earned. What is different about universal credit is that it is based, in almost all cases, on real-time information about earnings. Therefore, there is a greater reliability of information about the earnings going into somebody’s bank account than under the tax credits system. 

The amendments seek to require the Secretary of State to prescribe exceptions to the basic principle that all overpayments of universal credit and those benefits within the scope of clause 102 will be recoverable. As the hon. Member for Westminster North said, amendment 253 seeks to include a requirement that recovery of 

“Official error overpayments of benefits” 

by benefit-paying authorities can be made only when the claimant could reasonably 

“have been expected to know they were being overpaid.” 

The practical reality is that we do not have to recover money from people where official error has been made, and we do not intend, in many cases, to recover money where official error has been made. There will be an absolutely clear code of practice that will govern the circumstances in which recovery action will or will not be taken, to ensure consistent, considered decision making. 

What I do not want to do, however, is apply the one-size-fits-all approach suggested by the amendments. If we prescribe circumstances for a discretionary write-off or non-recovery of an overpayment, we will miss the fact that every case is different and every circumstance is different. The degree of error is also different in every case. We must have sufficient flexibility in the system to apply discretion and common sense to individual cases. 

We all recognise from our own constituencies some of the scenarios where it is clearly right not to seek recovery of overpayment. For example, a member of a couple might commit fraud, abandon the household and leave the other completely innocent member of the couple to cope with the outstanding debts. I have dealt with constituency cases to that effect, and I have given quite careful thought to the clause because I have seen such cases. A woman has come to me saying, “My husband has left me, I’m not really in contact with him any more, the money was paid to us, and now he gets away with it and I don’t. I have to find the money and I have to pay the bill.” I am therefore acutely sensitive to the fact that that problem exists. We must have an absolutely clear code of practice that says that in such a case we will not recover overpayment from the innocent party—that must be made absolutely clear. 

With recovery of all overpayments, a number of factors will be considered. We will consider not only whether the claimant received the money in good faith but whether recovery of the money is likely to cause the claimant or their immediate family significant hardship or threaten their health or welfare, which was a point made by the hon. Member for Westminster North. That will be an important factor when we consider the recovery of overpayments. In such situations, “hardship” can mean various different things. We are dealing with

vulnerable people, including people with mental health problems who cannot possibly be reasonably expected to know that an overpayment had been made. 

Let me give members of the Committee another example from the other end of the scale, which will show why it is necessary to have some flexibility in the system. A claimant may make a claim for universal credit, declaring capital of £20,000. The assessing officer makes a mistake, misreads that sum as £2,000 and awards universal credit on that basis. We make a couple of payments to that person before the error is noticed and the award is revised, which results in the recognition that an overpayment has been made. The claimant did not query the accuracy of the award, because there was no reason for them to do so. Why would they query it? The question is this—do we say, “There was a bank error in your favour and you can have the money”, or do we say, “You’ve got 20 grand in the bank, we’ve made a mistake and paid you a few hundred quid too much, and we’d like it back”? In that circumstance, I would argue that we should take the latter approach, because we have a duty to protect the interests of the taxpayer. In different circumstances in which it has taken years for the mistake to be discovered and the capital in the bank has been spent, the decision to enforce repayment of the substantial overpayment might mean significant hardship and should not be taken. 

It is about applying common sense to the individual case. We do not intend repayments to cause undue hardship, and if a claimant cannot afford the suggested repayment rate, we will suggest an alternative one. My concern, however, is that prescribing a set of circumstances in either primary or secondary legislation would create a straitjacket that would make it difficult to judge the right—and the wrong—thing to do in individual circumstances. 

Ian Swales:  The Minister raises an interesting point. If we had a show of hands in the Committee on the example he just gave, I suspect that we would not get a unanimous view in either direction—likewise from managers of those making the decisions. How detailed will the codes of practice for the various offices be, to avoid disparate treatment between offices and regions? 

Chris Grayling:  I am clear that there will be a detailed code of conduct that sets out the kind of circumstances that people should take into account when deciding whether repayments should be made. We are simply saying that circumstances vary too much to write them into the legislation, and it would be as absurd for a decision maker to say, “In law, I’m afraid I have to make that person repay and I don’t want to,” as it would be for them to say, “It’s ludicrous not to make them repay, but I can’t make them.” 

We have talked about the principle of trusting front-line professionals, and we really are seeking to ensure that we have quality, well-trained decision makers with the freedom to take the right decisions in sensitive areas, against clear guidelines on the things they should be looking for—and hardship is very much included. We are taking that approach because it is important not to write off the option in law of taking a decision in an individual case by making the law a bit too prescriptive. 

In principle, there is no disagreement between us. I do not want people such as the constituent whom I met being told, “You have to repay, even though you’ve been

left in the lurch.” It is absolutely clear that that should not be the case, but I do not want a legal straitjacket that makes it impossible to recover money when all common sense says that we should. I hope, therefore, that the hon. Member for Westminster North will accept the nature of the clause and withdraw the amendment. 

Ms Buck:  I am sorry to say that I was slightly more alarmed at the end of the Minister’s contribution than I was at the beginning. I genuinely welcome the sincere commitment to put in guidance a presumption in favour of vulnerable people—the sincerity is absolutely clear. However, it is likely that to capture the very rare and extreme case of someone with a substantial amount of capital—a cleverly constructed example but, I expect, unrepresentative—we will need a manual running into hundreds of pages and a level of discretion within Jobcentre Plus. Officers will have to spend a huge amount of time considering the merits and demerits of all such cases, testing them against a manual that gives guidance on what their actions should be, and then seeing those decisions tested, probably frequently, in the courts. 

Chris Grayling:  If we put a detailed list of prescribed cases into regulations, as the hon. Lady has described, exactly the same would apply. 

Ms Buck:  The presumption is to try to keep the equivalence that there is in the current system, but the Minister’s proposal shifts the balance of responsibility to allow individual judgment in more cases. I referred earlier to the role of case law, and I do not think that any of us wants an even greater proliferation of the testing of cases in lots of different circumstances. If the assumption, in the case of official error, is against recovery, surely that has a knock-on consequence on the amount of official time spent making judgments and on the time spent by advisers and lawyers challenging them. 

My hon. Friend the Member for Stretford and Urmston made a good point in that regard. The Minister assumes, rightly, that the simplification of universal credit and, above all, the real-time way in which it will be determined will reduce the scope for official error. That is absolutely right. As my hon. Friend said, however, the corresponding danger is that bringing together all the different payments means that individuals face risks, because the stakes will be a great deal higher. 

Another thing that the Minister has not reflected on is the fact that the real problem with tax credit overpayment was the child care element, which involved a larger share of overpayments and a larger amount of money. Although we look forward to the seminar on Monday, the child care element of universal credit is not likely to be integrated via a real-time assessment, in the same way as earnings. The concern about overpayment is not likely to be eradicated by universal credit; indeed, it has the potential to be even worse. Despite the Minister’s assurances, it will be more complex and Jobcentre Plus staff will be under greater pressure to make those decisions. 

As we have discussed—we will refer to this again briefly when we come to clause 111—we want to be assured that a legitimate drive to reduce fraud and error in the benefits system does not send out a message that

Department for Work and Pensions staff will be expected to recover more and more money. They should not be allowed to look more effective in their task if they make more recovery orders than in the past, regardless of the implications for vulnerable individuals. 

These are probing amendments and, as is often the case with Opposition amendments, technical issues need to be ironed out and we do not intend to press them to the vote. I do not doubt the sincerity with which the Minister stated his intentions, but that is offset by a concern about what will happen when a plethora of individual judgments are made and tested under those circumstances. I suspect, despite his assurances, that the reality is that a substantial minority of vulnerable individuals is more likely to fall through the net. We will, of course, look at what the regulations introduce, but I am worried that, yet again, as universal credit drives us in the direction of simplification, so many of the books on the bookshelf lead us in the direction of greater complexity. With that caveat, I beg to ask leave to withdraw the amendment. 

Amendment, by leave, withdrawn.  

Clause 102 ordered to stand part of the Bill.  

Clause 103 ordered to stand part of the Bill.  

Clause 104 

Application of Limitation Act 1980 

Question proposed, That the clause stand part of the Bill. 

9.45 am 

The Chair:  With this it will be convenient to discuss new clause 8—Limitation Act 1980— 

‘The Limitation Act 1980 applies as enacted to the recovery of the social security payments as with all other sums that may be recoverable from a person.’.

Kate Green:  This is a probing new clause that seeks assurance from the Minister about the period over which social security overpayments under universal credit could be recovered. Normally, the period of recovery is six years. I am concerned that clause 104 appears to alter that in the case of social security benefits, which would cause hardship or overpayments through claimant or official error, which could go back many years. I just want to understand the Minister’s thinking on how far back such recoveries could go? 

Chris Grayling:  I reassure the hon. Lady that this is not a change in policy; it is a technical clarification following a court case that appeared to question an aspect of the existing law. The new clause would apply the Limitation Act 1980 to all recoveries of social security debts, including through direct deduction from continuing benefit entitlements. 

Clause 104 clarifies the application of the Limitation Act to the recovery of benefit overpayments and of social fund and tax credit debts through methods other than court action. It ensures that recovery of such debts through deduction from ongoing entitlements can continue beyond the six-year period of limitation for court action. 

It has long been assumed—it was assumed by the previous Government—that the statute of limitations has no application to the recovery of benefit overpayments

or social fund debts by means other than court action. Such recovery might be an ongoing month-by-month deduction of £1 a week, or whatever. 

There was a recent High Court case involving a local authority, unconnected with the recovery of benefit overpayments or social fund payments, that came to a different view. It is necessary to reintroduce the measure so that we can carry on recovering the balance of our public debt for a period beyond six years. In many cases, seeking to recover social security or tax credit debt by means of deduction in a period of no more than six years actually places an extra financial burden on families. 

We are not proposing anything new. The clause simply clarifies a long-standing, well accepted interpretation of the application of limitation legislation to the recovery of such debts. It simply ensures that, given that a court case has thrown it into doubt, there will be no doubt in law that we can recover payments over a long period of time where it is appropriate for the circumstances of the claimant. By law we will not have to bring the shutter down after six years and, therefore, curtail the repayment period. 

Kate Green:  I am grateful to the Minister for that clarification. I am aware of the court case he refers to, the case of Joseph. The DWP has never accepted or implemented the judgment on Joseph, and it was not a party to that case. 

The clarification is welcome, and I understand that the Minister wants to spread recovery in a way that enables individuals who are liable for such overpayments to manage cash flow effectively. 

Question put and agreed to.  

Clause 104 accordingly ordered to stand part of the Bill.  

Clause s 105 and 106 ordered to stand part of the Bill.  

Clause 107 

Prosecution powers of local authorities 

Question proposed, That the clause stand part of the Bill. 

Stephen Timms (East Ham) (Lab):  I am pleased to see you back in the Chair this morning, Mr Weir. 

Clause 107 introduces the single fraud investigation service, which is quite a big change. At the moment fraud in the case of benefits administered by the DWP is addressed by investigators working in the DWP, and housing benefit and council tax benefit fraud is investigated by people working for the local authorities. It might be said that that is a rather localist arrangement, but the Government will sweep it away and put in place a single fraud investigation service. I understand why they might choose to do that. 

Will the Minister tell us how this significant change will work. In particular, what are the Government’s plans for existing local authority benefit fraud staff? Will they be transferred via TUPE to the new single fraud investigation service? How many staff does he envisage there being in the single fraud investigation service compared with the number in the two separate investigation units—the DWP plus the local authority units—at the moment? 

I would also be grateful if the Minister would tell us a little more about what this single fraud investigation service will be like. Will it be an autonomous organisation of some kind, or simply a division within the DWP? How will it fit into the structure of the DWP? At the moment, as I understand it, there are fraud investigators, for example, in Jobcentre Plus. Will they be taken out of Jobcentre Plus and put into this new single fraud investigation service? What about fraud investigators in the Pension, Disability and Carers Service? Are they to be taken out of that service and put into this new single fraud investigation service? How will the SFIS fit into the structure of the DWP? Where will it report to, ministerially? Will he be the Minister responsible for the SFIS? Which official will be in charge of the SFIS? Will it be a separate official in charge of the new service, who will then have a place on the DWP executive board? I would be grateful if he would explain how that is all going to work. 

I have a specific question. We have had a good deal of discussion in Committee about the muddle that the Government have got themselves into on council tax benefit. We know that there was an unseemly row between the Secretary of State for Work and Pensions and the Secretary of State for Communities and Local Government about where council tax benefit should sit in this new world. Unfortunately from the standpoint of welfare reform and of us on the Committee, the Secretary of State for Work and Pensions lost that battle. We can only hope that he does better, with the support of the Deputy Prime Minister, in his battle with the Chancellor about the benefit cap; we all look forward to hearing the outcome of that. Anyway, the council tax battle has been resolved and we are left with a not-quite-universal credit, unfortunately. 

Just how comprehensive was the victory of the Secretary of State for Communities and Local Government in this matter has only become clear with the publication of the revised departmental business plans on the No. 10 website last Friday. We had some discussion about another aspect of those business plans in our discussion on Tuesday. The new business plan for the Department of Work and Pensions, or the 48-page document I referred to on Tuesday telling us changes between the November business plan and the current, May business plan, says: 

“November text… Previous 1.7(iii)…Draft regulations on localising Council Tax Benefit and consult with the Social Security Advisory Committee”. 

That is what the DWP was expecting to do. Then this document about changes has another box which says, “New text”, for 1.7(iii) and under that it simply says, “Removed”. That requirement on the DWP, that expectation, has gone entirely. The reason for change, the next column says, is that: 

“Responsibility for this action has transferred to the Department for Communities and Local Government and now features in that department’s Structural Reform Plan”. 

So responsibility for regulations about this new arrangement for council tax benefit has been taken away from the DWP and given to the Department for Communities and Local Government. I think that that is a real setback for the prospects for coherent welfare reform, it is very regrettable and means that the ability of the Secretary of State for Work and Pensions to constrain all the different little council tax benefit schemes

that will be introduced by each local authority on its own will be very limited. We could say, reflecting on the victory of the Secretary of State for Communities and Local Government, that it leaves us with what we might describe as “a pickle”. The Minister obviously has the job of putting a brave face on this debacle and has explained to us in previous Committee discussions that all of this reflects the Government’s commitment to localism. 

However, we then come to clause 107, which is about as unlocalist as it is possible to imagine. That is understandable as it was obviously drafted before the Secretary of State for Communities and Local Government won his battle with the Secretary of State for Work and Pensions and before the Secretary of State for Work and Pensions had his late conversion to the attractions of localism. However, the Minister needs to tell us what the Government are going to do to put that clause into effect. Clause 107 will insert a provision into the Social Security Administration Act 1992 that means a local authority may not bring proceedings against a person suspected of a benefit offence relating to housing benefit and council tax benefit. On the face of it, local authorities will be administering their own individual council tax benefit scheme, but they will be banned by clause 107 from investigating council tax benefit fraud or bringing proceedings against it. 

There are lots of regulation powers and many books could be written about that matter and placed on this bookshelf, but I presume it would be possible to give local authorities back the power to tackle council tax benefit fraud—although that is clearly contrary to the initial intention of the clause as first drafted. Will the Minister say what the Government’s intentions now are and give us an explanation of how the measure will work? We will have a different council tax benefit scheme in every local authority in the country and the DWP has been elbowed out of the regulation-making role for constraining what such schemes will be like. I am therefore afraid that there is every prospect of frustrating the Minister’s aims, which are shared across the Committee, to have a coherent welfare system with a simple and straightforward structure—a single taper and a clear disregard. The new council tax benefit scheme, which is different in every local authority, will be laid on top on that and who knows what the combined impact will be. 

Who in this new era will be responsible for, first, investigating and, secondly, prosecuting council tax benefit fraud? Will it be the single fraud investigation service or will it be the local authority? The explanatory notes for clause 107 tell us that its aim is: 

“to prepare for the Single Fraud Investigation Service to assume sole responsibility for the investigation of all suspected benefit fraud.” 

Of course, that was written before the Secretary of State for Communities and Local Government won his battle with the Secretary of State for Work and Pensions. However, now that that battle has been resolved, it is not clear whether the measure still makes sense. Given that every local authority will devise and administer its own council tax benefit scheme, is it still the Government’s intention that councils will be banned from investigating council tax benefit fraud? If the Government are going to change that in regulations and give local authorities back the ability to investigate and perhaps also to prosecute council tax benefit fraud, how will the

Government ensure that there is effective joint working between the new single fraud investigation service and local authority benefit fraud staff? 

How such investigations are currently conducted reflects the fact that often people who commit council tax benefit fraud also commit housing benefit fraud. Local authority benefit fraud staff can deal with both issues. Is it the intention that the single fraud investigation service will take over all of this, as the explanatory notes state? Alternatively, given the council tax benefit administration settlement, does the Minister envisage that local authorities will still have the powers and, indeed, the obligation to investigate and prosecute council tax benefit fraud? 

10 am 

Chris Grayling:  I listened carefully to the right hon. Gentleman. I know that he likes to return to his conspiracy theories about the workings of the Government, but I can reassure him that relations between Departments are good and constructive, in marked contrast to the experience of the last 13 years, when, as far as I could see, they were always at each other’s throats. 

The reason for the provisions is straightforward. Currently, a claimant committing a fraud could be investigated by three separate organisations with different investigation and prosecution policies, and the totality of the fraud committed might not be prosecuted. The process is inefficient, unfair and expensive, and given these lean times and our financial inheritance, we must be mindful of such things. A single unified service will ensure that the totality of a claimant’s offending is considered and prosecuted where appropriate, whether for fraud on social security benefit, tax credit or the forthcoming universal credit. It will increase the efficiency of the service, bring benefits to the taxpayer and ensure greater equality of treatment for claimants. It will also deliver more investigations and sanctions by increasing the number of tax credit investigations. 

There is significant overlap in the claimant bases of the Department for Work and Pensions and local authorities, and there are currently 380 different local authority prosecution policies for benefit fraud, which does not seem entirely sensible. The single fraud investigation service is designed to adopt a single prosecution policy for benefit fraud. 

Stephen Timms:  It is worth adding that the Minister’s Department has always had a benefit fraud inspectorate that oversees the efforts of local authorities. However, I think that he is saying that the SFIS will have responsibility for all council tax benefit fraud as well. Can he make it absolutely clear whether that is his intention? 

Chris Grayling:  Yes. It is a single fraud investigation service. It does not make sense for us to create a system involving 380 different prosecution units in local authorities. I do not see why it is not practical for the local authority to say, “We’re a bit concerned about Mr X. Can you go and sort him out?” Surely it is logical not to create a system like that. We are not removing local decision making; for the smooth operating of the public sector, it is logical to have a single system of fraud investigation, given the crossovers between different benefits and individual claimants. 

Margaret Curran (Glasgow East) (Lab):  In light of what the Minister just said, has he reflected on the separate arrangements in Scotland particularly, but also in all the devolved Administrations? Given the decision to devolve council tax benefit, they might disagree or take a different view. Is he willing to negotiate with them on that? 

Chris Grayling:  I reassure the hon. Lady that I cannot answer any questions about that, because the issue is devolved in Scotland. It is a matter for the Scottish authorities, so she will be able to argue the case in Scotland. All prosecutions in Scotland are a matter for the Procurator Fiscal Service, and that will certainly not change as a result of the provisions. 

Stephen Timms:  Surely the Minister’s intention is that the single fraud investigation service should be UK-wide. Is it not? 

Chris Grayling:  The clause, when enacted, will not apply in Scotland, because in Scotland it is a devolved matter. It is the decision of the Procurator Fiscal whether to prosecute. 

Stephen Timms:  The Minister is being generous. Surely DWP benefit fraud in Scotland will be investigated. Will it not? At the moment, it is investigated by DWP fraud officers. In future, presumably, it will be investigated by the single fraud investigation service. 

Chris Grayling:  Clearly, we must discuss the exact modus operandi with the devolved Assemblies, so I am probably being hard on the hon. Member for Glasgow East, but the changes proposed in the Bill will not apply in Scotland, because prosecuting decisions ultimately reside with the Procurator Fiscal and the Scottish authorities. Although we can certainly continue to investigate in a joined-up way, it is the decision of the Scottish authorities whether to prosecute. That is a matter for the Procurator Fiscal. 

Stephen Timms:  My hon. Friend the Member for Glasgow East raised an important point. Will the single fraud investigation service operate in Scotland? 

Chris Grayling:  It is our intention that it will work in Scotland, but decisions about prosecution are a matter for the Scottish authorities and the procurator fiscal. 

The right hon. Member for East Ham asked various questions about how the single fraud investigation service will be organised. We have not yet decided how the new service will be structured. We are in discussions with key organisations such as the Fraud Investigation Service, Her Majesty’s Revenue and Customs and local authorities to design the new organisation. It will be part of the DWP and report to a DWP Minister. We have not taken firm decisions about staffing issues. Officials have met local authority representatives to discuss the joint strategy, which includes the introduction of the new service. The service’s organisational design is in the planning stage, and we will provide more detail as the results of that work emerge. I am happy to share further information with the right hon. Member for East Ham as progress is

made, but the service will report to a DWP Minister, and decisions have not yet been taken on the staffing specifics that he raised. 

It is important, however, to take Members back to the clause, because that, fundamentally, is what are we are debating. The clause allows the Department to restrict local authorities’ power to prosecute suspected benefit fraud once the service has begun operating. At that point, authorities will not need autonomous powers to investigate and prosecute suspected fraud. 

We already have powers to restrict local authorities’ powers to investigate benefit fraud, and we need to be able to apply them to housing benefit and council tax benefit offences. We will use existing and new powers in tandem to support the SFIS in investigating, and the DWP in prosecuting, all welfare benefit fraud. That goes back to the point about prosecution: it is the Scottish authorities’ decision whether to prosecute; we do not take that decision. 

During the period when the SFIS starts to operate, and before all new claims for housing benefit come to an end, the clause will allow local authorities to prosecute offences in certain circumstances. The right hon. Gentleman will see that there are specific provisions for the Secretary of State to allow local authorities to take prosecution decisions. That will allow existing prosecution processes and investigations to continue through the transition period. The circumstances where that will happen will be limited, but we do not want simply to bring the shutters down on processes that have already begun. Indeed, in exceptional circumstances—for example, in a complex area of housing benefit, where a big local authority has particular expertise—we may even wish to allow local authorities to prosecute in cases where an investigation has not started. That, then, is where we have got to. We think it is more sensible to have a streamlined system than multiple different agencies potentially involved in the process. 

Let me clarify the situation in Scotland for the hon. Member for Glasgow East. DWP benefit fraud is prosecuted by the procurator fiscal, and that applies to the prosecution of income support fraud, employment and support allowance fraud, benefit fraud and so on. At the moment, benefit fraud in Scotland is investigated by the Scottish division of our fraud investigation team. The SFIS will carry on investigating, but the procurator fiscal, not the DWP, will oversee decisions about prosecution. 

Stephen Timms:  The Minister has set out a very unlocalist arrangement. However, may I press him a little further on plans for existing local authority benefit fraud staff? I take the point that the details are not yet known, but he presumably envisages at least some existing local authority benefit fraud staff moving into the SFIS. Will he tell us a little about the time scale? When is the new service likely to be up and running and when is a decision likely to be made about who will transfer from local authorities into the new division in his Department? 

Chris Grayling:  This is quite a sensitive issue from the point of view of the staff involved, and if the right hon. Gentleman does not mind, I do not want to start giving too many indications that may raise or dampen hopes and expectations at this time. I will be happy to share

information with him in confidence as matters develop, but I do not want to start announcing changes before we have finished the detail or taken decisions about how staff will be deployed. Perhaps I can crave his indulgence and say that I am happy to continue to brief him, but I do not want to make on-the-hoof announcements or to give indications that may cause individual staff worries and anxiety long before we have completed the organisation’s design plans. 

Stephen Timms:  I am grateful to the Minister, and I will wait for that information, but can he at least tell us when he envisages the SFIS being up and running, in place and ready to do its work? 

Chris Grayling:  Our intention is that it will be April 2013. With that, I hope that the clause can stand part of the Bill. 

Clause 107 accordingly ordered to stand part of the Bill.  

Clauses 108 to 110 ordered to stand part of the Bill.  

Clause 111 

Civil penalties for incorrect statements and failures to disclose information 

Ms Buck:  I beg to move amendment 257, in clause 111, page 74, line 36, leave out ‘an’ and insert ‘a significant’. 

The Chair:  With this it will be convenient to discuss the following: amendment 265, in clause 111, page 75, line 10, at end insert— 

‘(3A) The amount levied under subsection (2) shall not be greater than the value of the overpayment arising from failures outlined in subsection (1).’.

Amendment 258, in clause 111, page 75, line 34, leave out ‘an’ and insert ‘a significant’. 

Amendment 259, in clause 111, page 75, line 44, leave out ‘an’ and insert ‘a significant’. 

Amendment 266, in clause 111, page 75, line 47, at end insert— 

‘(2A) The amount levied under subsections (1) and (2) shall not be greater than the value of the overpayment arising from failures outlined in those subsections.’.

Ms Buck:  To continue our discussion about overpayment, the amendments probe the Government’s thinking on civil penalties, how and where such penalties will apply, and the proportionality that will be used in cases of fraud and error. The clause introduces into the Social Security Administration Act 1992 new provisions on incorrect statements and the failure to disclose information, with the aim of bearing down further on levels of error and fraud. I repeat: we are wholly supportive of measures that reduce fraud within the system. Fraud is an abuse that takes away money that could be better used helping vulnerable claimants and supporting public services. When looking at fraud and error, however, it is important to strike a proportionate balance that looks at the individual, and at the treatment of errors that stem from official sources or those that are due to unwitting but well-intentioned mistakes by constituents. As has

been noted, a significant proportion of those who claim benefits or tax credits already face numerous health, literacy or language barriers to understanding the forms they have been asked to complete. 

Amendments 257, 258 and 259 seek more information about proportionality. The Bill currently states that civil penalties will be applied where 

“the error results in an overpayment,”. 

We seek to inject the word “significant” into that line, and to ask the Minister for a clear indication about where discretion may be applied. It is hard to believe that the Government intend to apply a civil penalty if an error leads to a marginal overpayment—that might be an extreme example, but there will be cases of an overpayment that is only a few pounds. The application of a civil penalty in all cases of error would be expensive to administer, and would create a disproportionate bureaucratic burden that will dramatically increase the number of people who fall foul of such penalties. 

The impact assessment claims that the wider civil penalty has been introduced 

“to deter errors and place greater emphasis on personal responsibility for errors that could have reasonably been prevented.” 

We are increasingly seeing advice and representation services disappearing, not least because of changes to legal aid, and people who need assistance in completing their forms and assembling information will get even less support from the system in the future. The aim is to simplify the system through universal credit, but as we heard when we discussed clause 107, council tax benefit will lie outside that. We know about changes and some localisation within the social fund, and about the difficulties the Government have experienced in working out a sensible way of integrating child care payments. There are many inconsistencies and anomalies that will remain within the system, even when universal credit is introduced. People with mental health issues, language issues or other barriers will fall innocently foul of the system. 

10.15 am 

Two ends need to be tackled. One is where those overpayments are marginal and are therefore at or below the recommended level of £50, which is what is being suggested as the standard civil penalty. The other is with the child care element of the system, which has led to the majority of overpayments in the tax credit system, where overpayments will occur and be reclaimed. The sheer stress of dealing with an unexpected debt, arising from overpayment through innocent error and, in some cases, official error, will itself be a sufficient deterrent to individuals, ensuring that they take even more care in future in making their applications. It is extremely important that we do not apply civil penalties and add extra financial pressure to individuals in cases where that error was well intentioned and inadvertent, particularly with individuals who struggle to properly interact with the system. 

Three of the amendments of this group would inject the word “significant” into the clause. We want to find out a little more on what the Government’s thinking is on the levels of overpayment that would trigger a civil penalty. How might discretion be used, without leading to an unnecessary increase in bureaucratic and time-consuming negotiations between the DWP and individuals? 

The other two amendments in this group would specify that civil penalties cannot be greater than the level of the overpayment, precisely so that those individuals who are liable to a relatively small overpayment do not find themselves paying even more with a civil penalty. I want to know what the Government’s thinking is on those individuals. I look forward to the Minister’s reply. 

Chris Grayling:  We are fully committed to reducing all types of overpayment, whether they are caused by administrative or customer error. We lose £1.2 billion each year through overpaid benefits administered by the DWP, due to errors made by claimants. It is unfair, unaffordable and unacceptable in the current climate. We should not be seeing and tolerating error in our benefits system. It impacts on the resources we have for other Government programmes. Claimants should take responsibility for the accuracy of their claim and the information they provide. People receive claimant forms and accompanying information or booklets, making it clear to them that the information that they supply should be correct and that they need to notify the Department of relevant changes. 

It is important to give a bit of context to the £50 civil penalty. It is designed to sit between those cases of genuine error that we described in the previous debate and those cases of clearly fraudulent actions. There needs to be a halfway house for those individuals who are negligent in supplying incorrect information or in making incorrect statements to us and who have no reasonable excuse for that failure. 

Let me be clear, we do not intend to add this penalty to every claimant who has had a benefit overpayment. That would be completely wrong. There are many cases where vulnerable people will make mistakes and there is no intention of applying a penalty to those situations, for example, with someone with a mental health problem who does not understand the nature of what they are doing. It is reasonable to expect that other claimants provide accurate information, as well being willing to tell us about changes of circumstances, the arrival of a new partner or whatever it may be that is a duty of a claimant. We should not accept negligence—not innocent mistakes—in these matters. We might not want to prosecute people who do not tell us that they have a new partner who has moved in, but it is not unreasonable that, if they do not tell us, there should be some kind of consequence for doing so. 

Amendments 257 to 259 would limit the penalties so that they only apply if there is significant overpayment, which does not reflect the seriousness of many claimants’ failings. All cases considered for a civil penalty will involve claimants acting negligently or failing without reasonable excuse to do something they should have done. Nor do the amendments take account of the real costs to the Department of an overpayment. We incur a cost for every overpayment, whether of 1p or £500. It takes time and money for officials to investigate possible overpayments and to correct them. A low overpayment received by a claimant does not reflect the true cost to the Department or the public purse. In reality, even the £50 payments are the tip of the iceberg of how much public money is spent because of claimant error. So I do not accept the arguments in those amendments. 

On amendments 265 and 266, we have deliberately set the intended amount of the penalty at £50 to strike a balance between being sufficiently punitive to remind

claimants of the need to take care that the information they give the Department is accurate, and not being too severe. A flat-rate £50 penalty is the fairest approach—we thought it through carefully, and it strikes the right balance, to send a message without unduly imposing a burden on people who are on benefits. 

If the two amendments were accepted, one claimant who was overpaid by more than £50—even £51—would receive a different penalty from a person whose overpayment was £49. I do not see the logic in that. We do not consider that fair: both claimants are at fault for telling us something wrong or not telling us something important. They might even have said exactly the same thing or made the precisely same error, but we would be treating them differently. I do not see why one person should have a lower penalty than the other person. 

Hon. Members might say that fault is connected to the amount of the overpayment, but I do not agree. The amount of the overpayment is irrelevant. The issue is whether individuals give misleading or negligent information and fail without reasonable excuse to tell us that their circumstances have changed—we are not talking about amounts of money. Did claimants fulfil their duty by telling us something had happened in their lives that had changed their situation materially, in terms of their right to receive benefits, or did they not? That is what we are responding to, and to the true cost to the Department being much higher. 

I do not accept the principle that the penalty should be lower just because the overpayment was slightly less than £50 rather than more. The £50 penalty is a fairer approach; it makes claimants more personally responsible for the overpayments they incur; and it will encourage a positive change in behaviour. People will know that they have to do something, and that if they give incorrect information—such as wait a few months before telling us that they have a new partner who has moved in—there is a consequence. That is the right thing to do and, if claimants change their behaviour and take proper responsibility for their benefit claim or award, we have a good chance of cutting down part of the very large amounts of money lost each year as a result of customer error. 

I am absolutely clear that the provision is the right thing to do and strikes the right balance. I am afraid that the amendments do not take us in the right direction and I beg the Committee to reject them. 

Ms Buck:  I am disappointed by the Minister’s reply, because there is a fundamental problem. If the Minister is saying, as he has done today, and previously in discussions about overpayments, that there needs to be discretion in the system, implicit in that is that people in identical circumstances will be treated differently. Discretion will mean that offices in different parts of the country, or different officers, will make different judgments. 

Chris Grayling:  Does the hon. Lady understand that the discretion is about whether to apply the penalty? 

Ms Buck:  Exactly. I am sorry, I cannot see what the Minister is saying. Absolutely, if discretion is in the system, an officer will be deciding whether to apply the penalty. The Minister illustrated his case by specifically mentioning poor mental health, but mental health is a

spectrum and, in many cases, subjectively defined—certainly as to the degree of mental ill health and the extent to which it impacts on people’s ability to take responsible decisions, which we can see from someone’s mental health condition being described quite differently by two different doctors. 

An officer in the DWP will, therefore, have to decide whether to apply a civil penalty to someone with a mental health problem. The individual might produce evidence from the GP or consultant about the impact of clinical depression or a psychotic condition, and the officer, who might have a degree of training, which

would be welcome, will be making a decision based on several tiers of slightly different subjective information about the impact of the condition. That will mean, inevitably, that the decision whether to apply a civil penalty will be made differently—different judgments in identical circumstances. 

10.25 am 

The Chair adjourned the Committee without Question put (Standing Order No. 88). 

Adjourned this day till One o’clock.