Employment and Support Allowance Contents

1The Department’s management of the error

1.On the basis of a report by the Comptroller and Auditor General, we took evidence from the Department for Work and Pensions on the errors it made in its administration of Employment Support Allowance.1 We also heard from the National Association of Welfare Rights Advisers (NAWRA) and the Disability Benefit Consortium.

2.Employment and Support Allowance (ESA) is a benefit that the Department pays to people who have limited capability to work because of their disability or health problems. There are two main types of ESA:

contribution-based, which is based on the National Insurance contributions previously paid by claimants; and
income-related, which is a means-tested benefit. Income-related ESA can be paid on its own or as a top-up to contribution-based ESA.

3.Extra payments, called premiums, are available for claimants who are eligible for income-related benefits. These can significantly increase the amount of benefits paid.

4.In 2011, the Department began transferring people from older benefits, such as Incapacity Benefit, to Employment and Support Allowance. The Department’s legislation and related regulations required it to assess each individual case and award what would have been payable had the individual made a new claim for ESA.2 In practice, the Department followed a different process and assumed that people who had been receiving means-tested benefits would continue to do so and those who had been receiving contribution-based benefits would also continue to do so.3 This meant that an estimated 70,000 people were awarded only contribution-based ESA when they might also have been entitled to means-tested ESA. As a result some claimants missed out on premium payments which are only available to those in receipt of means-tested benefits.4 Around 70,000 people have been underpaid an average of £5,000 each. The Department estimates that 20,000 of these will be owed around £11,500 and some as much as £20,000 each.5

The cause of the error

5.The Department did not seek legal advice to make sure that the administrative process it planned complied with its own regulations before starting to transfer claimants to ESA.6 It told us that its internal review of the process, conducted in late 2017, found that although its policy and operational staff had undertaken a lot of work to design the process, there was no evidence they had sought or received advice from the Department’s legal staff. The Department accepted that this was wrong and should not have happened. The Department explained that it had amended its procedures to ensure that appropriate legal advice is taken at all times to stop this from happening in the future on other benefits, such as Universal Credit.7 We asked the Department whether it had identified any other examples where legal advice had not been sought. The Department could not confirm whether it had checked this.8 The Department’s internal review also found no evidence that its senior management had signed off the transfer process its more junior staff had designed. The Department told us that it was confident that a similar mistake would not happen in the future because it had put in place systems and checks to make sure that new operational processes are formally signed off by a strict list of people that includes a senior official and Government lawyers.9

6.The Department asserted that it had designed the process for transferring claimants to ESA to reduce the burden on claimants. It explained that it did not want to impose further burden on claimants by asking them for information on their income when they had already been asked to go through a new work capability assessment. The Department conceded that this approach was wrong. The Department also told us that the processes it had put in place to test the roll out of ESA, including its own pilot exercise, did not identify the subsequent error in transferring people’s claims to ESA correctly.10 Nevertheless, experts such as the Social Security Advisory Committee had said that the Department should delay the process of transferring people onto ESA, to take stock and ensure that arrangements were working but the Department did not act on that advice.11 In response, the Department said that in its view the Social Security Advisory Committee had not raised this specific error in payments as a reason not to carry on and that it had instead wanted to “move on” and make progress and avoid unnecessary delay in transferring people to ESA.12

A lack of urgency in tackling the error

7.The Department has taken six years to start to correct this underpayment of people’s benefits.13 Front line staff in the Department had raised the error in transferring claimants to ESA at least as early as 2013 because the Department had responded by issuing advice to its benefit decision-makers recording the correct process for further transfers in June of that year.14 The Department acknowledged there was a more general problem with underpayments in ESA, stemming from errors in the transfer process, in its annual statistics on the level of fraud and error in the benefits system for the 2013–14 financial year, published in May 2014. In preparing these statistics, the Department took a representative sample of ESA benefit payments and estimated the value of benefits overpaid and underpaid by its staff and found that premiums on claims were regularly being underpaid. At first, the Department tried to claim that this error was the fault of claimants.15 The Department later admitted this was incorrect when an internal arbitration panel decided in April 2014 that not assessing entitlement to income-related benefit premiums on transferring claims to ESA was the Department’s mistake.16 In June 2014, the Department issued further guidance to its decision makers on the correct process for dealing with new cases but did not take action to address the stock of cases that had been dealt with incorrectly, which had already built up.17

8.If claimants disagree with the outcome of the Department’s decisions on their ESA claim, they can ask for it to be reconsidered by the Department. If the claimant disagrees with the decision reached in that reconsideration, they can appeal to a First-Tier Tribunal. On points of law, further appeals to the Upper Tribunal may be possible.18 Upper Tribunal judgements can have important and wider implications for the Department’s interpretation of the legislation and regulations that guide the processes it uses to administer benefits. The Department told us that between the start of 2014 and June 2015 it had been waiting for Upper Tribunal decisions on two particular cases that, in its view, would clarify important points of law relating to ESA.19 These were decided in October 2014 and June 2015. In the first, the judge decided that there was no legal requirement to make separate claims for the two elements of ESA (contribution-based and income-related) because ESA is a single benefit. In the second, the judge decided that the Department should consider both contribution-based and income-related elements of ESA when converting claims to ESA and if it failed to do this, then it needed to correct what should be viewed as its mistake (‘official error’).20

9.These cases had a significant bearing on the Department’s eventual response to its error in transferring people’s benefits claims to ESA, but their significance was not fully recognised at the time decisions were made.21 The Department told us that its internal review had concluded that it had been correct to wait for results of the June 2015 Upper Tribunal decision but it acknowledged that it still took no action to address historic underpayments after this decision. The Department conceded that it had been too slow to act.22 We were not convinced by the Department’s argument that it needed to delay dealing with historic cases of underpayment until the law had been clarified by the outcome of the case decided in June 2015. As NAWRA pointed out, the Department had already recognised its mistake in its statistical bulletin on fraud and error in May 2014 following internal arbitration on the matter in April 2014.23 NAWRA also said that where it had raised individual cases of this mistake with the Department, some claimants had received arrears payments back to the date when they were transferred to ESA.24

10.The Department’s Fraud and Error Team began to take further the issue of addressing historic errors in May 2016. Following their analysis, they escalated the matter to the Department’s senior management in November 2016. The Department then spent several months exploring the extent of the problem, telling us that it felt it needed clear legal advice on what its liability was, what people were entitled to and what it needed to do. The Department told us that it was only in July 2017, after it had received legal advice, that it was clear what it needed to do next.25 It commissioned a team in August 2017 to begin contacting a small number of those affected and make repayments.26

Failing to draw on external expertise

11.The National Association of Welfare Rights Advisors told us that its members started identifying errors with ESA payments in 2013 or 2014, and that the extent of the errors meant that it realised the problem was systemic in early 2014. NAWRA told us that it first raised the issue of underpayments formally with the Department in July 2014.27 NAWRA told us in written evidence that some members of the online Rightsnet forum had pursued individual cases with front-line Departmental officials from 2011.28 The Department’s revised guidance to its decision makers, issued in June 2014 for all new transfers to ESA, did not fully address early concerns raised by external organisations because it was not accompanied by action to refund underpayments for all those affected.29

12.NAWRA and the Disability Benefits Consortium told us that, more generally, the Department’s attitude towards external organisations that attempt to raise what they consider to be legitimate concerns can be unconstructive. NAWRA and the Disability Benefits Consortium told us that while their engagement with the Department’s front line staff can be positive, those front-line staff can appear to face a Departmental “brick wall” when trying to address stakeholder concerns.30 Despite the Department establishing forums to consult with external organisations, the Disability Benefits Consortium and NAWRA said that these arrangements are not always used effectively31. NAWRA told us that the Department’s central teams can be less than helpful in its engagement with stakeholders. For example it told us that it had recently received a letter from a senior Departmental official accusing NAWRA of “scaremongering” for raising concerns about the migration of claimants from ESA to Universal Credit.32 We were encouraged to hear that working better with stakeholders is one of the new Accounting Officer’s four senior management priorities for his Department.33

1 Report by the Comptroller and Auditor General, Errors in Employment and Support Allowance, Session 2017–19, HC 837, 21 May 2018

2 C&AG’s Report, para 2.3

3 Q1, C&AG’s Report, para 2.3

4 Qq 47–48

5 C&AG’s Report, para 2.14

6 Q 50

7 Qq 50–51

8 Qq 59–60

9 Q 131, C&AG’s Report, para 2.5

10 Qq 47–49, 57–58

11 C&AG’s Report, para 2.5

12 Q 49, 56