New Clause 17

Welfare Reform Bill – in a Public Bill Committee at 4:00 pm on 28th November 2006.

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Overpayment of benefits

‘(1) For the purposes of section 75(1) of the Social Security Administration Act 1992 any amount of housing benefit paid in excess of entitlement may not be recovered if the overpayment was the fault of the Secretary of State.

(2) For the purposes of section 76(1) of the Social Security Administration Act 1992 any excess benefit may not be recovered if the payment of excess benefit was the fault of the Secretary of State.’.—[Danny Alexander.]

Brought up, and read the First time.

Photo of Danny Alexander Danny Alexander Opposition Whip (Commons), Shadow Spokesperson (Work and Pensions)

I beg to move, That the clause be read a Second time.

The new clause relates to the process by which overpayments of housing benefit are legally recoverable. The Committee will know that, under the current housing benefit regulations, all overpayments are recoverable unless three conditions are satisfied: that overpayment was caused by official error; that the claimant did not cause that error; and that the claimant could not reasonably have realised that an overpayment had been made.

The new clause probes the Government’s thinking on how to deal with overpayments of housing benefit. The test that I have described—in particular the third element—is harsher than that for other Department for Work and Pensions benefits. As I understand it—I am sure that the Minister will correct me if I am wrong—the tests for those benefits do not include the third element. The new clause probes whether that additional third hurdle is reasonable.

Once again, I am indebted to Citizens Advice and Shelter for some useful briefings. Perhaps I should have stated earlier that I am vice-chair of the all-party group on citizens advice. I am not sure if that counts as an interest, but it certainly makes me interested. [Interruption.] I would not go too far. Citizens advice bureaux report regularly their concerns that overpayments are being recovered despite the fact that claimants have promptly and correctly reported their full circumstances and the overpayment is due to an official error or failure to act promptly on information provided by claimants in a timely, correct and appropriate way.

Failure to recover overpayments has an impacton local authorities’ performance targets so theyare reluctant—perhaps understandably—to use their discretion not to recover the money. In some cases, the resultant debt caused by somebody realising that there has been an overpayment that must be repaid, much like the problems in the tax credit system, puts a major strain on the household budget of the claimant, who by definition of the fact that they are in receipt of housing benefit is on a low income.

Where the claimant already has a suspended possession order against them and is repaying rent arrears, for example, on a set rate over a set time, the additional burden of repaying a housing benefit overpayment can easily tip them into breaching an order and facing eviction. The consequences of asking people to repay overpayments in circumstances in which they have done everything right except understand the rather byzantine and complex way in which housing benefit calculations are made can be serious, and in some cases cause severe hardship to claimants. In that shared spirit of concern about those in such circumstances, I look forward to the Minister’s response.

In many cases, it seems that the root of the problem is the regulation that allows the recovery of overpayments even in cases of administrative error, if the person ought reasonably to have known that they were being overpaid. It is worthy of the Committee’s consideration that the complexity of the housing benefit regulations, the scheme and scheme application process means that collecting overpayments on those grounds could in some case be unreasonable. I hope that the Minister will respond to that point in his reply to this short debate.

A further issue is that sometimes, in cases in which repayment is demanded even when someone has done everything that could possibly have been expected of them, bar understanding the complex procedures that would have been necessary for them to have realised that they were being overpaid, claimants do not seek advice and simply accept the overpayment recovery as inevitable and pay up. I am sure that many hon. Members in this Committee will have had that experience, not least in connection with tax credits, but I am sure in connection with other benefits as well. Those people have to cope with the consequences, which are likely to be long-term rent arrears threatening their housing security and living standards. As a result, they are more likely to get into debt in other areas. I know that the Minister is rightly concerned about child poverty. He will be aware of the impact that such long-term financial considerations can have on child poverty and I hope that he will look at the new clause in that light.

In his response, I would like the Minister to address the contention that, in the cause of fairness and benefits simplification, which we have been discussing, the housing benefits rules should be aligned with those of other means-tested benefits by removing from the provisions the words “reasonably have been expected” to realise, so that overpayments are recoverable only if the claimant has failed to disclose or misrepresented a material fact. Running through the Bill is the underlying principle of responsibility and we have debated during earlier clauses the idea of reciprocal responsibility. It is quite right that the claimants should have responsibilities—indeed, local housing allowance in particular will increase those responsibilities by giving claimants responsibility for paying rent themselves—but surely authorities have responsibilities too. Local authorities have a responsibility when they have made an error not caused by the claimant. Surely they should accept that rather than expect repayment to be made in all such circumstances. I look forward to the Minister’s response.

Photo of Tim Boswell Tim Boswell Conservative, Daventry 4:15 pm, 28th November 2006

I need make only a brief contribution. I sympathise very much with the spirit of the hon. Gentleman’s comments in moving the new clause. As a matter of what might be termed judicial reasonableness, Ministers are at least obliged to share with the Committee why the hurdles should be set slightly differently for housing benefit than for other benefits. That is not just some sort of lawyer’s quibble; it is a substantive issue.

I understand that to the extent to which something is obviously wrong, there is an obligation on the citizen to do something about it. I will share with the Committee an experience from my association with a not-for-profit organisation. We recently received a cheque for a six-figure sum from the Department for Work and Pensions. As it was mentioned to me by the treasurer, I had the opportunity to draw it to the attention of the Secretary of State—who I hope did not pocket the amount—and we got it back to the right place. It is perfectly reasonable when dealing with such people—the turnover of the organisation was rather less than £10,000 a year—to say, “Something has gone wrong, and we really ought to do something about it.” We can be good-natured about that.

I must admit to the Minister of State that I do not always agree with him on political issues, but I agree that I might have been a little sharper in my exchanges yesterday with his colleague the Under-Secretary of State for Work and Pensions, the hon. Member for Warwick and Leamington, on official error. I was somewhat surprised by his colleague’s assertion that only a quarter of overpayments related to official error rather than client or customer error. We will not debate that at length now, but the fact is that a significant number do arise from official error—too many for comfort. That is partly a function of the benefits system, and it is important that we should get to the bottom of it, see why it happens and get it rectified, which is the most important thing.

Our constituents who might claim, even more than some of us, to know a little bit about this complex system, are not expected to sit an exam on the details of the benefits system. They also have a perfectly natural predisposition to say that if the calculation is an official calculation it is likely to be right. I am not talking about people getting a cheque for £250,000 in the post as their housing benefit; I am talking about comparatively minor overpayments that are not easily spottable.

Photo of Adam Afriyie Adam Afriyie Conservative, Windsor

I am sure that my hon. Friend is aware that people with dyslexia or learning difficulties have great trouble reading multi-page forms and letters on benefits from local authorities and central Government. That exacerbates the issue.

Photo of Tim Boswell Tim Boswell Conservative, Daventry

I entirely agree. My wife used to be an adult literacy practitioner, and my hon. Friend accurately reports the experience of many people in that position.

I ask the Minister of State to reflect on one further point. I do not know the answer; I raise it in a spirit of inquiry. We had a little fun yesterday about the error taskforce. The error taskforce has an important job to  carry out, and I would like it to do so properly and be resourced to do so. I am not entirely clear whether its remit extends directly or indirectly to local authorities’ performance in overpayments of housing benefit. Administration of housing benefit is a function derived from statute but devolved by the Secretary of State to them as local housing authorities. It would make a lot of sense, given that it is for all practical purposes a social security benefit, if the error taskforce were able to investigate local authorities to see, for example, whether there are significant differences in performance between the 408 local authorities, as I suspect there are, or between the local authorities system and what one might call the central benefits system.

We in this Committee have a common interest in trying to get the regime right, minimising errors at source and being fair to citizens if an error occurs. Trying to tease out the right balance in doing so is the spirit of the hon. Gentleman’s new clause, and I hope that the Minister will reply accordingly.

Photo of Jim Murphy Jim Murphy Minister of State (Department for Work and Pensions) (Work)

The hon. Member for Inverness, Nairn, Badenoch and Strathspey was right to pay his compliments to Citizens Advice. Hon. Members on both sides of the House will likewise pay tribute to Citizens Advice nationally, and, more importantly, at local level for its phenomenal work in supporting people in communities throughout the length and breadth of the United Kingdom, not least in my constituency where a fantastic woman called Teresa O’Hara manages the citizens advice bureau in Barrhead to great effect.

The hon. Gentleman said that in tabling his probing new clause, he was motivated to make non-recoverable those overpayments in housing benefit and council tax benefit caused by DWP official error. I say first that the Government were minded to treat that type of overpayment in the way envisaged in the new clause. An addition to primary legislation would not be necessary, as current powers mean that the Secretary of State could do that by way of regulations if he were so minded. However, the Government do not intend to do that; all types of housing benefit and council tax benefit overpayments are recoverable from the customer, including those caused by DWP, Her Majesty’s Revenue and Customs, and the local authority itself.

That type of overpayment can be recovered only if the customer could reasonably have been expected to realise that they were being overpaid. Only then should recovery be pursued. If that were not the case, people would be allowed to keep taxpayers’ money when they knew they were being overpaid. That is not reasonable, and I do not believe any hon. Member would consider that to be a reasonable way for a Government to behave. If we were to try to convince the Committee that it was reasonable, I suspect that a series of alternative amendments would be tabled, quite fairly, to say that it was not.

Photo of Tim Boswell Tim Boswell Conservative, Daventry

We all understand the outlying case, such as the one I cited, half in jest, about a six-figure overpayment. The insidious and difficult case is one in which the citizen or claimant is receiving slightly more than they should, so there is a grey area as to whether  they, a non-expert on the social security system, thought, “Well, that is a bit more than I was expecting, but if that is what they sent me they must be right.” That is different from a grossly obvious overpayment. It is easier to see that something is wrong if the overpayment is a thousand quid a week than if it is a tenner a week.

Photo of Jim Murphy Jim Murphy Minister of State (Department for Work and Pensions) (Work)

The hon. Gentleman makes a fair point, which is why the customer has the right to appeal against the decision to recover overpayment. That is the important protection within the system.

The DWP seeks repayment of overpayments under common law. Housing benefit and council tax benefit are treated as they are in terms of the recovery of overpayment primarily because the customer would be expected to know their rent level and their council tax liability, so the types of wild fluctuation that the hon. Member for Daventry reasonably raised would be easily identifiable within a housing or council tax benefit payment.

I hope that that reassures hon. Members on both sides of the Committee. We know from constituency case work—the letters we receive from constituents and the people who attend our surgeries—that the matter causes frustration and worry. That is why the balance of the challenge is on reasonable expectations, and why people have the right to appeal against a decision. We must also ensure that recovery measures are implemented sensitively, so that the customer—the citizen—can afford the repayment from their remaining income. That is important, particularly in the context of child poverty and family poverty in general. Although it might not have a dramatic impact on the 60 per cent. median income measure of relative poverty, it will have an acute impact at a local level on material and absolute poverty. We should not lose sight of that as we roll out the local housing allowance and try to get the system absolutely right.

Photo of Danny Alexander Danny Alexander Opposition Whip (Commons), Shadow Spokesperson (Work and Pensions) 4:30 pm, 28th November 2006

Probably the nub of the debate is the meaning of the word “reasonable”; perhaps it always was. The way in which the Minister described the meaning of the word was reasonable, and I think that all members of the Committee would agree with it. My concern was that in some specific cases the implementation on the ground is not as reasonable as the Minister described. I am reassured by his remarks, but I hope that he will monitor carefully the local implementation of the provisions to ensure that the reasonableness provision is not used, contrary the intentions behind it, to require claimants to have a level of knowledge and understanding of the benefit system that might only be held by a few academics, and perhaps not even to members of the Committee. I beg to ask leave to withdraw the motion.

Motion and clause, by leave, withdrawn.