1.The Department’s arrangements for transferring people to ESA were fundamentally flawed and implemented without basic checks. The Department did not consider all the risks of transferring claimants from their old incapacity benefits to ESA. It did not seek legal advice before starting the exercise to make sure that the administrative process it planned was compliant with its own regulations. This woeful omission was made worse by the failure of the Department’s senior-level management to sign off the arrangements. The pilot exercise for the process, a good idea in principle, was demonstrably inadequate because the error was not picked up. The Department’s implementation of the conversion process was subsequently rushed, despite advice from experts such as the Social Security Advisory Committee that the Department should delay and take stock. As a result, some 70,000 vulnerable people were underpaid for years, losing out on an average of £5,000 each as a result. Over 20,000 of those most in need are owed around £11,500 and some as much as £20,000. The Department now accepts that it got the process wrong and has apologised for the errors.
Recommendation: The Department should identify lessons learned from this error and write to the Committee by the end of October 2018 with details of the concrete actions it is taking to ensure mistakes in converting benefits are not repeated, especially in the roll out of Universal Credit.
2.The Department’s lack of urgency in taking six years to start to address the error indicates its culture of indifference to underpayments. Over a period of several years the Department failed to act on information and intelligence from its own front line that the ESA transfer process was not working correctly. The Department acknowledged the error in ESA payments in its published fraud and error statistics in 2014, but front-line staff knew about the issue at least as early as 2013. Once the errors came to light, some in the Department tried to classify them as the claimant’s fault. It later accepted that this was wrong and accepted that the mistake was its fault in April 2014. In June 2014 it issued new guidance to correct the process for new cases but did not act to put right existing underpayments. Instead, it waited for the outcome of Tribunal judgements, on which it also took no action. It was the Department’s Fraud and Error Team that again escalated the issue to senior management in November 2016. The Department then took a further eight months before commissioning a team to begin identifying and repaying people affected, and only then following advice that it had a legal responsibility to act.
Recommendation: The Department should, by the end of October 2018, write to update us on the additional changes it has put in place to address a management culture which does not proactively and systematically act on intelligence from its front line and fully address mistakes when they first occur.
3.The Department’s inertia in dealing with ESA payments was compounded by a lack of willingness to listen to experts and stakeholders. The Department could have acted to correct the process of transferring people to ESA more quickly had it listened more closely to what organisations that represent benefits claimants told it about the extent and systemic nature of the error. The National Association for Welfare Rights Advisers and the Disability Benefits Consortium told us that its members had realised there was a systemic problem with the Department’s transfer process in early 2014 and that NAWRA had written to the Department to highlight the issue in July 2014. They also told us that attempts more broadly to engage with the Department can be frustrated by a lack of engagement or from DWP centrally, and that the Department sometimes responds defensively to organisations raising legitimate concerns. The Department told us that it is now prioritising improving how it works with stakeholders to help prevent this issue from occurring in future.
Recommendation: The Department should, by the end of October 2018, write to us with details of how it will improve its processes for gathering and acting on concerns raised by stakeholders and how it will routinely measure and report its progress on this.
4.The Department has not assessed how much money in total claimants have missed out on. The Department told us that it is currently working on paying arrears to people affected and is aiming for this to be complete by April 2019. The amount owed to each claimant varies according to their circumstances but the average is expected to be £5,000. Some are owed much more, with one in five being owed £11,000 and some as much as £20,000. The Department is working on the basis it will only pay back money claimants are owed after 21 October 2014 and asserted that social security legislation prevents it from paying back underpayments built up before this date. This cut-off is currently subject to legal challenge. If the Department’s legal position is confirmed, claimants will miss out on an estimated £100 to £150 million in benefits. Regardless of the ongoing legal case, we were not convinced that the Department’s response goes far enough in ensuring that those in need are properly reimbursed. The Department has not assessed how much money claimants have lost in “passported” benefits that they might have been entitled to had they been awarded means-tested ESA, such as free prescriptions, help with dentistry costs or free school meals. The Department has chosen not to provide compensation for its slow response, insisting that it does not pay “blanket compensation”. The Department cited concerns for taxpayer’s money and the principles of Managing Public Money as the reason for this. However, Managing Public Money specifically provides for remedies and compensation for loss caused by maladministration and service failure.
Recommendation: The Department should calculate the total amount of money claimants have missed out on, including passported benefits, and report back to the Committee by end October 2018 on what it will do to ensure claimants receive appropriate remedies in line with Managing Public Money.
5.The Department’s abysmal communication with claimants exacerbated the scale and impact of its error. It is the Department’s responsibility to set the rules covering benefit claims and entitlement, and to communicate these clearly to applicants and claimants. How well it does this will affect claimants’ ability to claim the benefits that they are entitled to. The Disability Benefits consortium and NAWRA confirmed our experience as Members of Parliament representing our constituents, which is that the Department’s communications with claimants are at times incomprehensible. We welcome the Accounting Officer’s frank admission that even he does not understand all the letters his Department sends to claimants. In the case of transferring claimants from the old incapacity benefits to ESA, the Department issued forms to claimants that did not make clear that claimants could be substantially better off if they were also entitled to ESA on income grounds. Without this information, there is no reason why claimants would necessarily have known why it was important to contact the Department about their benefits.
Recommendation: The Department should review urgently: the clarity; accessibility; simplicity; and ease of reading of all its letters to claimants and report back to the committee by the end of November 2018 on the results and what steps it has taken to improve them.
6.We are still not convinced that the Department is serious about reducing the £1.7 billion underpayments claimants miss out on each year. The Department asserts that it prioritises addressing underpayments but this is not supported by the evidence of serious underpayments within ESA. Our constituents and their representatives continue to tell us that when claimants are underpaid, the Department is slow to write to claimants to let them know and correct its mistakes. In comparison, where claimants are overpaid, the Department writes to claimants to inform them of this much more quickly. The Department’s current target is that underpayments should be no more than 0.9% of total benefit expenditure. This lacks ambition and amounts to a continuation of the status quo as it matches the level of underpayments in previous years. It does not challenge the Department to improve, nor does it reflect the number of real people’s lives affected. We were concerned that other similar significant errors are potentially being made within other benefits meaning that large numbers of vulnerable people could be similarly underpaid. The lack of a target to reduce underpayments significantly alongside a lack of information on the impact of underpayments on claimants’ lives makes it more likely that the Department remains complacent and that the real impact of underpayments continues to be hidden from view.
Recommendation: The Department should, by the end of November 2018:
Published: 18 July 2018