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Taking the second point made by the noble Lord, Lord McKenzie, which is allied to that to a great extent because it is a matter of how a claimant affords to live in the mean time, whatever the outcome of the appeal, the tribunal's decision takes effect from the date of the original decision. So if the tribunal rules in the claimant's favour and, for example, makes an award of benefit where the original decision was that the claimant did not qualify, all the arrears of benefit will be paid in full from the date that the claim took effect. I do not think that that particularly addresses the noble Lord's concern.
The noble Lord and the noble Baroness expressed the concern that claimants will not qualify for the payment of ESA pending reconsideration. I have said before and I will say again-I hope that this will address the point made by the noble Lord-no appellants should be left without support since other benefits such as JSA should be available in those cases. He also asked a broader question about benefits more generally and generously offered me the opportunity to write to him or meet him. I would be grateful if we could expand on that in such a forum.
Lord McKenzie of Luton: I am grateful to the noble Lord for that and very happy to deal with that matter through correspondence. However, what does he believe to be a reasonable timeframe within which the reconsideration should routinely take place? What is the target and the plan for the department?
Baroness Hollis of Heigham: The Minister is being very helpful on this but I want to go back to the point made by my noble friend. This stemmed originally from what the noble Lord, Lord Freud, corrected, which was a misapprehension in the press some time
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The other side of that moral hazard issue is: how many people, and under what circumstances and what benefits, could lose their income even though ultimately it might be reinstated by an appeals tribunal and backdated? During the process, which could very well take six weeks, what do they live on? The noble Lord may be able to respond now but, if not, perhaps he can write to us about in what circumstances, with what benefits and with what clients there could be a situation in which someone could lose their benefit, even though they were appealing and might subsequently be reinstated? During that process they could be living basically on the kindness of strangers.
Baroness Drake: If there is an intention to put much more emphasis into making the reconsideration stage effective and efficient, is the department intending to commission an independent audit of that and to publish the findings so that people can have confidence in the effectiveness of the changes at the reconsideration stage?
Baroness Meacher: I thank the Minister for that full response and the detailed explanations about a number of these tricky issues. I have no doubt that my noble friend who is unable to be with us today will read Hansard carefully and may want to come back to it later.
"(8) For the purposes of this section, "entitlement" means the amount that would have been awarded to the claimant had the claim been correctly represented and all relevant material facts disclosed for the period to which the overpayment applies."
Baroness Lister of Burtersett: In moving Amendment 103ZZZA I shall speak also in support of Amendment 103ZA tabled in the name of the noble Baroness, Lady Hollins, to which I have added my name. In fact, Amendment 103ZZZA has been designed with the help of the Child Poverty Action Group to complement and support Amendment 103ZA, and it is just an accident of drafting that it is being taken first. I shall therefore start by speaking to Amendment 103ZA, which also has the support of Carers 2000 and a large number of charities and churches. The purpose of the two amendments is to apply to universal credit the rules on recoverability of overpayments that reflect those currently applied to most benefits in regard to official errors that a claimant could not have known about and to provide for the offset of underlying entitlement from overpayments, a concept that I shall explain in a moment.
This is a fair and just test which has been in place for many years and has been tried and tested in case law. Its purpose is to allow the recovery of an overpayment which arises as the result of a claimant's actions or failures, whether innocent or fraudulent, but protects the claimant in a case where the overpayment arises because of official error by the benefit authorities. In other words, it sanctions recovery in the case of negligence by the claimant but offers protection in the case of negligence by the state. I believe that this is a fair and just balance which reflects the responsibilities of claimants to correctly notify their circumstances when claiming benefit and the benefit authorities to calculate correctly and pay awards based on the information available to them.
Clause 102 proposes to allow recovery in all cases regardless of culpability. I believe that this alters the balance of responsibilities and justice unfairly in favour of the state. It would mean, for example, that a claimant could be presented with a large bill for repayment amounting to thousands of pounds many years after an overpayment occurred, even though the overpayment was due entirely to the negligence of the benefit authorities. In return for providing accurate and up-to-date information, I believe that a claimant is entitled to the accurate calculation of payment of entitlement by the benefit authorities and that the state should bear any losses caused by its own negligence.
In the other place the Minister of State accepted that 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 them realising it, and they only discover afterwards that they have incurred a substantial debt. We have to be careful and sensitive in that situation. He went on to say:
"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'".-[Official Report, Commons, Welfare Reform Bill Public Bill Committee, 19/5/11; col. 1018.]
That recognition of the sensitivity of this is welcome, but my answer to the Minister's question in this instance is "yes". The Government's view however, is, of course, "no". Although the Government appear to have recognised the justice of the case, they have done so only by indicating that they will provide for non-recovery in cases of official error in a code of practice on recovery. Can the Minister say whether that code of practice will be published, whether it will be made public, and exactly what it will cover?
I do not believe that a code of practice is sufficient, and I would argue that it is essential that provision is statutory so that an aggrieved claimant has the right of appeal against recoverability to an independent tribunal. The claimant should have a clear right rather than be vulnerable to discretionary decision-making. The Government have expressed their confidence that the introduction of universal credit will significantly reduce the scope for official error. If that is the case, the administrative burden of retaining protections for claimants unjustly prejudiced by official-error overpayments should be greatly reduced.
The system of automatic recoverability, perhaps supplemented by a non-statutory code of practice as proposed in Clause 102, mirrors the system which applied to tax credits. This system has blighted the administration of tax credits, caused widespread injustice and hardship and has been widely condemned in the media and in reports by the Parliamentary Ombudsman and the Select Committees in the other place. It has also resulted in thousands of complaints to MPs, the Revenue adjudicator and the ombudsman.
Amendment 103ZZZA provides for the offset of underlying entitlement when calculating overpayments. Underlying entitlement means the entitlement that would have been paid to the claimant had the claim been made correctly at the time. For example, an overpayment might arise if a claimant had separated from their partner and the claim continued to be paid as a couple claimed for several weeks after the date of separation. The claimant had not declared the change of circumstances immediately and had told their personal adviser that they were not aware that they needed to because they had hoped that the separation was temporary. I think that sometimes, in those circumstances, you do not really want to face up to what is happening. If the claim is cancelled from the date of the separation then the claimant must make a new claim. However, had they immediately declared the change then their claim would have been reassessed as a single claim, so it would have given rise to entitlement as a single claimant which could be offset against the overpayment as underlying entitlement. I am sorry that that is slightly complicated.
This mirrors the provision in the housing and council tax benefit regulations which ensures that only the true amount of excess entitlement is recovered. This provision is particularly needed in relation to universal credit because there is a requirement for the benefit to be claimed by either a single claimant or by both members of a couple, which, as is the case with tax credits, results in many notional overpayments when there is a change of status from single to joint claims and vice versa. The Revenue has belatedly recognised
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It may be that it is intended to do this in regulations. I must apologise because I have seen the draft regulations only today. I have had a quick look at them and it seems that they are perhaps intended to do that. I am glad that the Minister is nodding but it would be even better if he put it formally on the record so that we know that that is the case. I am very happy that for once the Minister is nodding rather than shaking his head when I am speaking. There is another question that I hope the Minister will be nodding at as well. Can he assure the Committee that there will be a right of appeal to an independent tribunal in the case of a dispute as to whether an overpayment was caused by official error and should or should not be recovered; or-I do not see any nodding going on there-if there is no such right of appeal, how will a claimant be able to challenge a decision to recover an overpayment?
In conclusion, this might appear to be a rather techy amendment. However, the strong lobbying by a wide number of churches and charities signals its significance. The reason they are so concerned is in part because they believe it to be simply unfair that a claimant might have to pay for a mistake made by the state. They are also concerned because they know from their own work what this would mean in terms of hardship and possibly increased debt to moneylenders and loan sharks as claimants' benefit was reduced below the statutory minimum. Heaven help them if they are also subject to capping. I hope the Minister will look favourably on a small but important amendment, which serves to protect the underlying rights of claimants. I beg to move.
Lord Kirkwood of Kirkhope: My Lords, I support the case that the noble Baroness has made. I am particularly interested in the answer to the question about an independent appeal right in these circumstances. That would be very useful indeed and I hope that the Minister can confirm that that will be true.
I have four amendments in this group. They can be dealt with with reasonable dispatch but they deal with a very important issue that surrounds the whole question of amounts recoverable by deductions from earnings. During the Bill's Commons stages the Government amended Clause 102 to add a new Section 71ZD(3)(e), which addresses the,
That is very welcome, as far as it goes, but I wonder whether the Minister could say a bit about whether any thought has been given to how that will be delivered and how that protection will be rolled out. That is important.
In the process, of course, these amendments seek to encourage the Minister to take the thing a little further because irreducible, attachment-free limits are available only on earnings and, as we heard earlier in the Committee, earnings are not the same as income. If it
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I would like to adduce the fact, which the department is no doubt already aware of, that there are models for doing this in other parts of the United Kingdom and the European Union. Our sister European countries have well developed systems for protecting income-and I mean income, not just earnings. Of course, it is much easier for them to do that because many of them start off with a minimum income system. There are three or four examples which I could quote if I had more time. That is a standard set-up on a basis that allows them to look at deductions based on limits in relation to national income levels that are well established and well set in other parts of their systems. We do not have that.
However, I want to take a moment to explain to the Committee that in Scotland there is a protected minimum balance available on arrestment of wages. It protects a set amount and the lower monthly threshold, when I last checked it in 2010, was in the region of £415 per month. With a level like that being protected when there are pending or arrested wages in Scotland, it gives a fair amount of protection to children in a family to defend against the detriment to mental and physical health. It also enables protection against some of the things that happen when families end up with not enough money to feed themselves.
The point that colleagues need to remember is that this is an administrative process. In courts there is always the backstop of the judge. At whatever level in the courts, there is someone who can ask, "What are the means?", and make a sensible judgment on the facts as shown in the case. Since it is an administrative process, we need to be as sensitive as we can to protecting people's ability to feed their families. We all know what happens otherwise; people are driven into the grey economy, criminality, drug abuse and worse, which is not a sensible thing to happen.
The amendment introduced in the Commons is welcome progress as far as it goes but I encourage my noble friend to think about, first, how he is going to roll this out and, secondly, whether he can be tempted to extend the protection a bit further so that basic family needs can be protected in the future. In addition to supporting the amendment tabled by the noble Baroness, Lady Lister, this is something that the Minister should seriously consider in the future gestation of the provisions of the Bill.
Baroness Hollins: My Lords, I rise to speak to Amendment 103ZA, which is in my name. I am grateful to the noble Baroness, Lady Lister, for speaking about it earlier and also to the noble Baroness, Lady Healy, and my noble friend Lady Meacher for their support. This Bill gives considerable discretion to jobcentre officials over many decisions and this amendment is
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Think about a claimant who has a letter from officials telling him that he is entitled to universal credit, which is paid to the landlord in rent. However, six months later, officials tell him that they have made a mistake and ask him to repay several thousand pounds-money that has already gone to the landlord, either direct from the local authority or from the claimant. The issue that then has to be discussed with the claimant is whether he or she could have known it was an error. If it can be proved that the claimant could not reasonably have known that it was, then the state has to bear the cost of the state's mistakes. It is difficult to understand why such a reasonable and just law should be repealed.
This amendment is proposed by Caritas Social Action Network and the Zacchaeus 2000 Trust and I am grateful to them for their detailed briefings. It is also supported by more than 20 NGOs, including organisations from five different Christian denominations, the Royal College of Psychiatrists, AdviceUK, Community Links, Derbyshire Unemployed Workers' Centres, Mind, Money Advice Trust, the National Housing Federation, Save the Children, Shelter and the United Kingdom Public Health Association. All of them, in one way or another, are working for the poorest citizens of the United Kingdom.
They are all concerned that overpayments of universal credit and council tax that claimants could not reasonably be expected to notice would be left to build up over time into significant cumulative debts that the state could then recover through court action or reductions in benefits. Such debt recovery would jeopardise basic living costs, housing security, payment of utilities bills and nutrition, and risk damaging mental health.
An additional concern relates to the announcement by the Minister for Employment in another place that the standard allowance of the universal credit will be £67.50 a week for a single adult. The Joseph Rowntree minimum income food standard is £46.31 a week for a healthy diet. The sum of £67.50 will not cover the weekly cost of all essential items for an adult, let alone the additional repayment of overpayments, debts or arrears.
The burden could be further increased, for example, through the state additionally recovering the costs that it incurs when making recoveries through the courts, or through employers recovering administrative costs that they incur when instructed to reduce a claimant's wages in order to offset a benefit overpayment. In both of these circumstances, people may end up with debts larger than the sum they were originally overpaid by-a seemingly illogical and unjust situation.
Another concern is that it seems possible that the DWP would be able to recover the overpayment from landlords, or from anyone who happens to be living with a claimant who is a beneficiary of the benefit concerned. The recovery of large blameless overpayments will have a devastating effect, not just on the claimant but on all other members of the household, which might include children, a pregnant woman or a disabled person who has particular additional nutritional and health needs.
It is inevitable that a new IT system for the delivery of welfare will create errors that are the fault of the employer entering information, officials at HMRC or the jobcentre. This is most likely when pilots are being run to test the system. The poorest citizens and their families should not have to pay the debts arising from any faulty consequences of the Government's reforms.
As well as these immediate and potentially devastating impacts, such significant financial burdens all too often result in mental health difficulties or exacerbate existing ones-a link consistently highlighted by prominent institutions such as the Government Office for Science or charities such as the Royal College of Psychiatrists and Mind. Numerous reports have drawn attention to the direct correlation between large debts and family breakdown, illustrating the further dangers of subjecting those dependent on benefits to unexpected reclaims. Clearly such consequences would be utterly at odds with the Government's intentions with this Bill.
Assurances have been given in the other place that officials will exercise common sense and considered decision-making, so as not to cause undue hardship. But the removal of the existing safeguard in primary legislation will mean that each case is ultimately based on the discretion of different officials, and would leave absolutely no guarantee that decisions will err on the side of protecting vulnerable people. This could lead to expensive litigation, if advice and legal aid could be found, which could have been avoided had the prohibition remained in place. However, it is more likely that the vulnerable claimant will pay, because of the lack of advice and legal aid, all of which has been cut. Then the claimants will suffer the stress of unmanageable debt and an increased risk of mental health problems and family breakdown.
It should be emphasised that the proposed amendment would not affect recoverability when overpayments result from the misrepresentation or withholding of relevant facts by a claimant, thus providing no respite for those seeking to defraud the system. Rather, it seeks to maintain three decades of protection-rightly afforded, in my view, to benefit claimants-from human error or technical fault by departments, landlords or local authorities, and any future errors as the result of the new IT system.
Baroness Healy of Primrose Hill: My Lords, I will also speak to Amendment 103ZA. I will be brief. It may appear overly generous on the part of a cash-strapped Government already making severe cuts in benefits and public services not to demand repayments. However,
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Lord McKenzie of Luton: My Lords, my noble friend Lady Hayter is going to do Front-Bench duty on this group of amendments. I want to speak briefly to Clause 105, where a probing amendment has been put down, to make sure that we have understood what is happening in respect of the statute of limitations.
My understanding is that, at the moment, to take action to recover sums which are outstanding, you cannot go back more than six years: they are statute-barred at six years. The issue is what an action is for these purposes. The clause clarifies that, other than proceedings in a court of law, recoveries of sums due are not actions. The consequence, as I understand it, is that they are not statute-barred, so unless you need to take action through court proceedings, as a result of this clause there is no statute of limitations applying to debts arising under the Social Security Act or the provisions that are set down in the clause. That seems to be a departure from the existing position.
Moreover, the clause says that the amendment is regarded as having always formed part of the 1980 Act, so that it is retrospective, and does not just operate from the date this clause comes into existence, except in respect of proceedings. I have a question as to what, for these purposes, the proceedings are which would still remain outside the retrospection of this clause. But more importantly, what assessment has been made of the additional amounts that might be brought in scope for recovery as a result of these changes to the law?
Baroness Hayter of Kentish Town: My Lords, as has been set out my noble friends and other noble Baronesses, the amendments relate to how and in what circumstances the state will seek to recover overpayment of universal credit from claimants. As many here, although not me, will remember, the issue of overpayments caused a considerable headache for the previous Government when tax credits were introduced, so it is vital that the present Government get this part of the Bill right. I am sure that anyone with those memories will support this.
In this Bill we have the added complication that, in addition to overpayments being recoverable from the claimant, they will also be recoverable, as the noble Baroness, Lady Hollins, has mentioned, from landlords
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I have certainly heard anecdotal remarks from both actual and potential landlords. By the way, I am not someone who thinks that lots of anecdotes add up to evidence. However, I have heard that the idea that landlords might be asked to make good some overpayment made to a tenant when they have no way of recouping it from the tenant is a further disincentive to entering or remaining in this market. I remind the Minister that this comes just at a time when access to private rented accommodation, especially the one-bedroom type quite favoured by small landlords, is so needed due to the housing shortage; to take in the swathe of refugees from the social housing sector as his policy on underoccupation kicks in; and as families may be forced to leave high-rent London for far distant places, as we heard earlier today. We need to encourage landlords to make properties available, not threaten them that they may be left paying for overpayment of a tenant's claims.
Amendment 103ZZA seeks to ensure that the recovery of any overpayment leaves the claimant with the correct entitlement based on their circumstances, as my noble friend Lady Lister spelt out. Again, this draws on the experience of tax credits, where in some cases claimants were asked to pay back overpayments on the one hand while applying for additional entitlement because of a change in circumstances on the other. The amendment would make sure that the end result is that the claimant receives the payment to which he or she is entitled.
Amendments 103ZZB, 103ZZC, 103ZZD and 103ZZE seek to replace references to earnings with those to income, and then to ensure that the recovery of overpaid benefits cannot leave a claimant without sufficient income on which to live. As has been said, within the current system protections of this type are in place, setting limits on the amount by which the DWP, local authority or HMRC can reduce benefit payments to recover an overpayment. Could the Minister let us know what limits the department intends to place on the recovery of universal credit, and whether they will meet the aim of ensuring that claimants retain a minimum amount on which to live?
Amendment 103ZA ensures that benefits overpaid as a result of official error cannot be recovered when the claimant could not reasonably be expected to know that he or she was being overpaid. In explaining new Section 115C in Clause 113, the DWP says that negligence constitutes not exercising the care which the circumstances demand; that is, being careless. It gives the example of not checking statements made in
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Each of us, perhaps even some very rich people in this Room, would know whether £1 million came into our bank accounts as opposed to the £1,000 that we were expecting. However, I have to confess that when the DWP pays my pension I have no idea whether the amount is correct. It is difficult to determine that, partly because I do not get a monthly statement-the equivalent of a pay slip-from the DWP and partly because it is four-weekly and every now and again there is a month when I receive two payments. If that happened to fall in January and then perhaps in October and I got a double payment, I am afraid that I would have absolutely no idea whether that was the correct timing for my extra bonus month-it is always very nice-or whether it was an error, and I have precious little way of checking. This amendment is about ensuring that any overpayment which the claimant could not be expected to know was wrong should not be clawed back. I promise noble Lords that it is not intended to protect my own position; it is tabled simply in the interests of fairness.
Lord Freud: My Lords, I am delighted to hear such full-hearted support for monthly payments. First, I would like to speak to Amendment 103ZZA in my name. This amendment is technical in nature and seeks to restore the policy intent and simple premise that where a claimant has a debt, the debt should be recoverable from them. In the majority of cases, overpayments of benefit, penalties, payments on account and certain hardship payments will be recoverable from the claimant and will be recovered by deduction from the benefit that is paid to them. As the Bill is drafted, however, the Secretary of State is prevented from recovering such payments where the claimant's benefit is paid directly to a third party, for example a landlord. This means that recovery from a claimant is limited to deduction from those benefits paid directly to them. This is unintended and so this amendment seeks to ensure that where a claimant's benefit that is subject to recovery is paid to a third party, recovery may be made from that benefit.
This ensures that the DWP maintains the same powers of recovery as it does presently for recovery by deduction from housing benefit where it is paid directly to a landlord. Although the claimant may have other benefits from which deductions could be made, to do so adds both cost and complexity to the recovery process. In such cases, where no benefit is payable other than that paid to the third party, the DWP would be reliant on negotiating repayment from non-benefit income or potentially using direct earnings attachments to recover from debtors who are in pay-as-you-earn employment.
The situation becomes even more difficult where the debtor will not negotiate repayment, has no benefits paid directly to them and is not in pay-as-you-earn employment. Without the amendment, this would result in a situation where the DWP or local authorities have no effective way to recover the overpayment or penalty. I am sure noble Lords will agree with me that where
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I shall now address Amendments 103ZZB, 103ZZC, 103ZZD, 103ZZE, 103ZA and 103ZZZA. These opposition amendments seek to achieve a number of objectives, but are primarily concerned with protecting debtors. I am sure that there is no disagreement over the need for safeguards for vulnerable claimants and those in financial difficulty. We recognise, like the noble Baroness, Lady Lister, that protection needs to extend to the calculation of overpayments as well as their recovery. In common with the noble Baroness, we recognise that such a provision has value in ensuring that an overpayment reflects the true loss of public funds and for this very reason, such a provision already exists in secondary legislation relating to the recovery of overpayments of current benefits.
Like the noble Baroness, we believe that similar provisions should apply here, but feel that such a provision sits more happily in secondary legislation. For that reason, I am happy to offer my assurances that it is our intention to make provision for such a calculation in the regulations to be made under Clause 102, new Section 71ZB(4), which allows regulations to provide that recoverable amounts,
Concerning the other issues raised within these amendments, I believe that future overpayment recovery from working-age claimants will be more streamlined and efficient than it is presently. Recovery will thus provide both greater returns and better value for money for taxpayers. For example, under the previous Administration, it was believed that there was a right under common law to recover overpayments occurring due to official error, and the DWP thus requested repayment of those overpayments on that basis. I see that noble Lords who may have been responsible for those requests are in agreement. The Supreme Court, however, ruled that there was no such right and that is why we are legislating to bring the law for working-age benefits back in line with the policy of the previous administration-a policy that we support.
Prescribing that an overpayment caused by official error would not be recoverable if the claimant could not reasonably be expected to know that they were being overpaid brings forward a need to make subjective assessment of the debtor's capacity to understand entitlement before the overpayment is determined. Although I sympathise with the lack of understanding of the noble Baroness, Lady Hayter, about all the incredible overpayments that she gets and the £1 million that goes into her bank account on a regular basis, I have to say that that is not workable in this context. The DWP will not be prescribing those circumstances for the discretionary write-off or non-recovery of an overpayment. Cases will be considered carefully on their individual merits because each case is different.
As mentioned earlier, the code of practice will outline the policy as to whether recovery should be pursued, and lead to considered, consistent decision
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Considering whether an overpayment can, or should be recovered, the DWP will look at a number of factors, not solely whether the claimant received the money in good faith. It will have regard to ensuring that deductions from benefit or earnings-
We will ensure that deductions from benefit or earnings to repay an overpayment should not lead a debtor to suffer undue hardship. That remains a cornerstone of our overpayment recovery policy. As presently, future benefit recovery will be subject to regulations that provide for a maximum rate of recovery. In many instances, however, this maximum rate of recovery may still prove unaffordable for some claimants. In such cases, the DWP will discuss an alternative repayment rate.
Baroness Hollis of Heigham: I realise that the Minister is going fast, but let us be quite clear. In the past, and I stand to be corrected, my understanding is that when there has been official error and overpayment we would request a repayment. If that request was not responded to or met, effectively, that was pretty much the end of the story. In particular, somebody with a history of disability, poor health, financial pressures and so forth, almost invariably would not reply.
We need to hear from the Minister whether he is moving from request to require; whether he is moving the discourse from the first to the second. I thought that the first was reasonable, so that if they could afford it, they should repay, but if it was unreasonable, then they did not. If he is going from request to require, we need another step in the procedures to try to ensure that those from whom he will require the repayment of debt are in a reasonable position to do so. He cannot just change the words. He has to institute another procedure and another step in the equation. I know that the Minister is going fast but perhaps he might reflect on this and write to us so that we can take this up later. That must be the case.
Lord Freud: I am going to come on to that point, which is critical. Although the starting point for overpayment recoverability will be that almost all overpayments of working-age benefits within the scope of Clause 102 will be recoverable upon application, DWP will consider a claimant's means, income or expenditure if the debtor considers that they are in hardship.
Baroness Hollis of Heigham: The point is that under the previous system the recipient determined what would happen. What the Minister is suggesting is that the DWP will determine whether recovery takes place.
Baroness Hollis of Heigham: I am sorry to take up the Committee's time, but previously if the recipient said that they were not going to do it, that ended it. There was not an assumption that there was space for negotiation. What the Minister seems to be suggesting is that there will be a requirement, and then the claimant has to opt out rather than the old arrangement, which is that if the recipient said that they were not in a position to repay, that ended the matter. It is a question of where the power lies. Under the old system, the power of refusal lay with the claimant. The Minister is suggesting that it will lie with the DWP, and only if the DWP is persuaded will the claimant be allowed to opt out.
Lord Freud: Yes, that is the process. It becomes a requirement, and then if the claimant says, "Look, I can't afford that rate, I'm in hardship", then it is adjusted. That is a regular process. In practice, only half the people now make repayments at the maximum rate. That is a very well established process which works pretty well, and I do not think we need to put in extra processes.
My noble friend Lord Kirkwood-Kirkwood of Kirkhope, some people were unaware-asked about an independent appeal right. There is just a general appeal right here for overpayments, and I think that covers this as much as anything else.
Lord Freud: What we are talking about, and what I was describing, is where a payment would be going directly to a landlord, but it is for the rent. There would be recovery from that, so then the obligation becomes the debtor's to replace that amount for the landlord, so, no, the landlord does not have a right to appeal because it is not his money. It is just a direct payment device.
As my noble friend recognised with his amendments, claimants may have other debts that are being repaid that will impact their ability to repay their DWP debt. In such an instance, we may agree that recovery should be suspended until a particular financial commitment of the debtor ends. Additionally, because we recognise that hardship need not solely be financial, these considerations will include whether recovery is likely to be a threat to the health and welfare of not only the debtor but their immediate family. Exceptionally, where it is warranted, DWP may decide not to pursue or to stop pursuing recovery. These hardship situations are well established and balance the needs of the debtor and those of the taxpayer. I believe that this approach is more effective than the prescriptive considerations set out in the amendments. This approach ensures that those claimants who are able to meet the repayment obligations do so and recognises that in some instances there is a need to take into account a claimant's
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The noble Baroness, Lady Hayter, asked about limits on universal credit recovery. Recovery will be subject to a maximum rate, as it is currently. This will differ depending on whether the payment is wholly universal credit or a combination of universal credit and earnings. We still have well established hardship considerations. If repayment causes difficulty in those circumstances, we will be able to discuss it. I therefore urge noble Lords not to press these amendments.
The noble Lord, Lord McKenzie, has given notice of his intention to oppose the Question that Clause 105 stand part of the Bill. Clause 105 clarifies that the Limitation Act does not apply to the recovery of benefit overpayments and of social fund and tax credit debts by methods other than court action. It ensures that recovery of such debts by deduction from ongoing entitlement can continue beyond the six-year limitation period for bringing court action. DWP has long taken the view that the statute of limitations has no application to the recovery of benefit overpayments or social fund debts by means other than court action, including by deduction from continuing benefit entitlement.
However, in a 2009 case involving recovery of a housing benefit overpayment by a local authority the High Court came to a different view. DWP was not involved in that case, but given that it could be read as applying also to the recovery of other benefit overpayments and of social fund payments, we believe it is necessary to introduce this measure so that we remain able to balance the recovery of public funds against the financial circumstances of the debtor. 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 would place an unfair or impossible burden on the debtor and their family.
We are not proposing anything new; Clause 105 merely clarifies a long-standing and well accepted interpretation of the application of the Limitation Act limitation to the recovery of social security and tax credit debt. The provision ensures that all deductions of benefit made more than six years after the debt became due since Section 9 of the Limitation Act came into force were, or will be deemed to be, legitimately made. It is retrospective to cover the legality of recoveries of six years of debt already made under the presumption that that was the legal position.
By contrast, without this clause-Egyptian calligraphy is very complicated-we may be forced to endeavour to recover all overpayments within six years, and this would imply higher recovery rates and potentially hardship for claimants affected. We have made this measure retrospective to cover all recoveries already made, as I have already said. I hope this clarification will convince the noble Lord and the noble Baroness to allow Clause 105 to stand part of the Bill. I beg to move.
Baroness Lister of Burtersett: My Lords, I will be very brief. I thank the various noble Lords who have contributed and really strengthened the case that was made. Readers of the Official Report may not be able to tell a joke when they see it-my noble friend was not supporting monthly payments, and we will be coming back to that on Report.
Baroness Lister of Burtersett: I am very glad that the noble Lord has put on record that the question about underlying entitlement will be covered in the regulations. I am sorry that he is not prepared to put into statute the protection of claimants where it is the department that has made the mistake, not the individual. I am unhappy with so much discretion, and the noble Baroness, Lady Hollins, made that point. I am very pleased that the code of practice will be published in the form of a leaflet and that noble Lords will be able to see it before Report. I welcome that, and I welcome what I think the Minister said that there would the general right of appeal on overpayment questions. It is good to have that on the record. I beg leave to withdraw the amendment.
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