Public Authorities (Fraud, Error and Recovery) Bill

Baroness Lister of Burtersett Excerpts

Committee stage
Wednesday 25th June 2025 Grand Committee

Moved by

[Baroness Lister of Burtersett]

123: After Clause 96, insert the following new Clause—
“Overpayments made as a result of official error(1) Section 71ZB of the Social Security Administration Act 1992 (recovery of benefit payments) is amended as follows. (2) In subsection (1), for “The” substitute “Subject to subsection (1A), the”.(3) After subsection (1) insert—“(1A) The amount referred to in subsection (1) must not include any overpayment that arose in consequence of an official error where the claimant or a person acting on the claimant’s behalf or any other person to whom the payment is made could not, at the time of receipt of the payment or of any notice relating to that payment, reasonably have been expected to realise that it was an overpayment.””Member’s explanatory statement
This new Clause would bring the test for recovery of Universal Credit overpayments caused by official error into line with Regulation 100(2) of the Housing Benefit Regulations 2006 by providing that they can only be recovered where the claimant could reasonably have been expected to realise that there was an overpayment.

[Baroness Lister of Burtersett (Lab)]

My Lords, Amendment 123 is supported by the noble Baroness, Lady Bennett of Manor Castle, who is in the Chamber, and the right reverend Prelate the Bishop of Leicester, who regrets that he cannot be in his place. He was going to be replaced by the right reverend Prelate the Bishop of Manchester but he is also in the Chamber. I thank them anyway for their moral support, even if it cannot be practical. I also thank the Public Law Project for all its help with the amendment. I apologise that I was unable to attend Second Reading, but my noble friend Lord Davies of Brixton kindly gave notice of this amendment.

The amendment brings the test of recovery of universal credit overpayments caused by official error into line with the housing benefit provisions by ensuring that recovery can be made only where the claimant could reasonably have been expected to realise there was an overpayment. There is surely no better time to address official error overpayments in a Bill so appropriately named the “Fraud, Error and Recovery” Bill. However, it is currently one sided. Although it recognises the harms that both fraud and error cause in the social security system, it focuses only on the behaviour of claimants. It does not address the harms that result from the recovery of so-called official error overpayments. These are debts created because of mistakes made by the Department for Work and Pensions.

Unlike many other benefits, DWP can recover official error UC overpayments from claimants. This power was introduced in the Welfare Reform Act 2012 and represented a significant change to the position previously applied to most legacy benefits—that is, those that preceded UC. According to DWP data, in 2023-2024, 686,756 new UC official error overpayment debts were entered on DWP’s debt manager system. Is my noble friend the Minister able to give us any data on the circumstances in which official error overpayments occur and the average length of time before they are identified?

We are not just talking about numbers on a debt manager system. These DWP mistakes are having a serious impact on the lives of individuals such as D, who got in touch with me after hearing my noble friend Lord Davies raise the issue at Second Reading. D emailed me and we had a phone conversation. She told me that after her son was born, she was incorrectly told by DWP that she would be able to claim UC while her partner was studying for a master’s degree. Two years later, the DWP then told her that she was not eligible and that she now owed them £12,000—a “life-changing amount”, in her words. She has tried to dispute this through the tribunal system and the DWP complaints process. But even though the judge in the tribunal was sympathetic, the response has been that the DWP has the power to recover all overpayments, regardless of how they are caused. D now has £20 deducted from each UC payment she receives but no record from the DWP of how much she still owes.

It simply should not be the case that claimants such as D are paying the price for DWP mistakes. Public Law Project research demonstrates that the financial and psychological impact of overpayment debt recovery on individual claimants can be severe and is often associated with a particular sense of injustice. Understandably so, with individuals finding themselves unexpectedly in debt through no fault of their own.

The DWP’s default approach is to recover all overpayments regardless of how they are caused. The onus is on claimants to request discretionary measures, such as a waiver, but the DWP does not automatically tell them this. In 2023-24, only 75 waiver requests were granted; this equates to only 0.01% of overpayment debts registered that year. Could my noble friend tell the Committee what steps, if any, the DWP is taking to make waivers more accessible? In particular, would it consider following the example of the Department for Communities in Northern Ireland and automatically including reference to waivers in communications with claimants? Will it consider lowering the thresholds and evidential requirements to grant waivers?

In the Commons, the Minister referred to measures that were in place to mitigate the risk of harm associated with overpayment recovery. I welcome the introduction of the fair repayment rate, which I am sure my noble friend will mention. However, access to some of these safeguards is not an easy process for claimants to navigate. Moreover, as evidenced by research from the Public Law Project, Citizens Advice, the Trussell Trust and StepChange, and acknowledged by the DWP’s own guidance, those safeguards are not sufficient to prevent harm and hardship.

This was illustrated by a recent report from Policy in Practice about deductions from UC in general. It observed that many low-income households are already in crisis and at risk of deep poverty, prior to the application of deductions. I know that I do not have to explain to my noble friend the difficulties of trying to survive on universal credit and how low it is. That will still be the case despite the welcome, real-terms increase being proposed in the legislation currently before the Commons. Policy in Practice found that deductions risk placing households further from being able to afford the essential items of daily life. This is particularly the case for lone parents and carers.

Citizens Advice reports that fewer than 40% of its clients who contacted the DWP were successful in getting an affordability measure put in place, yet the DWP’s own guidance recognises that any recovery of an overpayment from any person in receipt of benefit is almost certain to cause some hardship and upset for them and their family. What criteria does the DWP use to decide what is an affordable deduction? Would the DWP consider agreeing an affordable and sustainable repayment plan with claimants before initiating recovery by way of deductions?

As I said, overpayment recovery is taking the individual below the amount that the DWP has assessed them to need, in a context where UC rates have already been shown to be insufficient to meet essential needs—a point emphasised by Policy in Practice. This is why I have tabled an amendment to bring the test for recovery of UC overpayments into line with the current test for housing benefit. It would ensure that UC overpayments caused by official error could be recovered only when individuals could reasonably have been expected to have realised that they had been overpaid. It places the onus on DWP officials to consider the fairness of recovery before initiating it. When UC was introduced, the then Labour shadow Minister for Employment considered this a just and fair test, which has been tested in case law.

This amendment would also create a clear incentive for the DWP to prevent these mistakes in the first place, which is a step towards a better-functioning social security system that gets things right first time. We ought to pay attention to the more than 30 charities that have written to the Secretary of State urging the Government to grasp this opportunity.

In introducing the Bill’s Second Reading, my noble friend stated:

“Our approach is tough but fair … fair on claimants, by spotting and stopping errors earlier and helping people to avoid getting into debt. It is fair on those who play by the rules”.—[Official Report, 15/5/25; col. 2346.]


But the current system is patently unfair to those who have been affected by an official error that they could not be expected to spot, and who have played by the rules as they understood them.

This is a fundamental question of fairness and of rights and responsibilities. If a government system makes mistakes, who should bear the consequences? Is it the system that caused the error and has the power to avoid it, or the service user who has no control over, or responsibility for, that mistake and, worse, is detrimentally affected by it? If we are serious about addressing fraud, error and the recovery of debt in the Bill, it would—for want of a better word—be an error on our part not to take action to end this unfair practice and source of economic instability for hundreds of thousands of families and individuals whom our social security system is there to serve. I beg to move.

[Lord Verdirame (Non-Afl)]

My Lords, I will speak in support of the amendment because it raises, as the noble Baroness, Lady Lister, pointed out, a question of principle. Should a person who received payments in error always be required to make restitution in full?

We are dealing with the application of this principle in the context of welfare payments, but it may be useful to keep in mind how this principle would apply in other contexts under our law. The default position is, as one would expect, that a party that has received money in error is obliged to return that money. However, it is also the case that our law has developed an important exception to this general position. This is known as the change of position defence, which was first recognised by Lord Goff in the case Lipkin Gorman v Karpnale Ltd 1991, where he said that

“the defence is available to a person whose position is so changed that it would be inequitable in all the circumstances to require him to make restitution, or alternatively, to make restitution in full”.

In essence, where the person has changed their position, in good faith, in reliance on that payment—for example, by spending it—restitution in a non-welfare context may be denied in whole or in part.

As I said, it is an equitable exception that our law has developed over a number of decades and on the basis of various decisions. It is a complex area of law known as unjust enrichment, on which many doctoral theses have been written. The reason it has attracted so much attention is that there is a conflict of fairness. On the one hand, it seems right that the payer who paid in error should, in principle, receive the money back and that people should not derive benefit from someone else’s innocent error. On the other, it also seems wrong that someone who made no error and relied, in good faith, on that payment should be unduly penalised. The common law and equity seek to strike a balance between these two concerns with the change of position exception that I have outlined.

For welfare payments, we are dealing with a context where statute rather than common law applies; however, it seems that the concerns that the common law has sought to address in other contexts arise even more acutely. The people who received the payments are socioeconomically disadvantaged and very likely to have spent that money, as the case mentioned by the noble Baroness illustrates. Thus, they are very likely to have changed, in good faith, their position by relying on those payments. To ask them to return that money is particularly burdensome on individuals who are on benefits and without a safety net.

Section 71ZB of the Social Security Administration Act, which the amendment proposes to change, seems a very blunt instrument. It responds to that first concern—to ensure that the payer, in this case the taxpayer, should have their money back—but it does nothing to protect the bona fide recipient of that payment from being penalised unduly. For that reason, it seems a fundamentally unfair provision. It seems wrong that the protection that a bona fide recipient of a payment in error would enjoy in other contexts, including a commercial context, should not apply to the bona fide recipient of a welfare payment made in error. This amendment seeks to remedy that unfairness, and it has my support for that reason.

It is true that Section 71ZB gives the Government a discretion and I suppose it will be said that there is guidance that tells the Government to exercise that discretion, taking into account certain circumstances. But the good will of the payer is not sufficient and that certainly is not the position under the general common law on restitution. It is not just a matter of the payer having the good will not to pursue the recovery of the payment; there has to be more to recognise that the innocent beneficiary, too, has an entitlement to protection. It seems to me that this amendment seeks to provide that correction to Section 71ZB of the Social Security Administration Act 1992.

I will, of course, be interested to hear what the Minister has to say about the various mitigations that might exist, but at the moment I agree that, unless the mitigation is in statute, whatever guidance might be in place will not be sufficient. I would also like to take this opportunity to thank the Minister and her officials for the very informative briefing last week.

--- Later in debate ---

I hope that has answered noble Lords’ questions and explained how the policy came about, what the safeguards are and the reasons why the department is operating in the way it does at the moment. We are very focused on improving payment accuracy while trying, where it is appropriate, to recover public money in a way that supports anyone struggling with their repayment terms. In the light of that, I ask my noble friend to withdraw her amendment.

[Baroness Lister of Burtersett (Lab)]

I am afraid it was remiss of me not to congratulate the Chair on the recent addition to his family and to send best wishes to his daughter—fingers crossed, and I hope it all goes well.

I thank all noble Lords who spoke, including the noble Lord, Lord Verdirame—he sounded so learned that I want to call him noble and learned—for his helpful contribution. There is something very comforting about having someone who knows the law coming in behind you and saying that this is a point of principle. I very much appreciated that, as well as the support of the noble Lord, Lord Palmer of Childs Hill.

I appreciated the sympathy expressed by the noble Viscount, Lord Younger of Leckie, but it felt a bit like doing contortions so as not to have to criticise what his Government introduced. I do not accept the argument about public money. It is not like there is little pot and that if some of that pot goes to someone who has been overpaid because of the department’s error, that money will not be there for other claimants. The talk about public money felt a bit like some of the arguments around taxation being theft and so forth because it is public, the “It’s our money, not their money” sort of thing. Anyway, I appreciate the sympathy with which he approached the question, and I appreciate my noble friend, as always, engaging fully with what was said. I am disappointed that the department is not willing at all to budge on this.

We have to remember that universal credit is complicated. It may have been sold to us by the previous Government as a simplification but, in fact, it is complicated and, therefore, not surprising if people do not understand the payment that goes into their bank account. Who understands how universal credit is worked out? The answer is not many people. That has to be borne in mind when we are talking about what it is reasonable to expect people to know and respond to. The noble Lord opposite talked about fessing up and realising they have got it wrong, but people may not realise they have got it wrong until it is brought to their attention by the department because, tardily—we will hear more about that when it comes to carer’s allowance—it is brought to their attention that the payment is wrong. It is a question not of hiding but of simply not knowing.

I understand that universal credit is a dynamic benefit and that the payments are different from what went before—it is different from housing benefit—but surely there could be a provision that allowed for repayment not to be made in certain circumstances. My noble friend talked about a right of appeal, but that is pointless in this situation. The person who contacted me, D, went to appeal. She had a lovely judge at the appeal who looked at what the DWP said and said, “I’d really like to be able to give you this, but I can’t because the law does not allow me to.” Everybody’s time was wasted. She was given undue expectations. My noble friend said that people are encouraged to contact the recovery team and work out a decent repayment rate. I am not involved in the day-to-day business of universal credit, but the organisations that have helped with this and asked me to put this forward know the situation, and that is not how they see it. What should happen in theory does not always happen in practice on the ground.

If nothing else, perhaps this amendment will encourage the DWP to look again at its procedures and the guidance to make sure that things are happening as they are supposed to happen so that the picture that my noble friend painted is an accurate picture of what happens on the ground. I will obviously want to read in more detail to see whether we want to bring this back. I very much appreciate my noble friend answering my rather nerdy questions. It is not the first time that we have exchanged nerdiness in this Room. With that, I will withdraw the amendment but will want to consider what we do on Report.

[Viscount Younger of Leckie (Con)]

I shall just pick up on what the noble Baroness said about universal credit and the fact that it is quite complicated. I hope she will agree that the old system, where there were six benefits, was particularly overcomplicated and that one of the successes of the past 14 years of government was that the six benefits became one. I hope she might accept that it is not quite so complicated and that, secondly, as I have been told and believe, if we had not done that then the system of paying out benefits would have been in severe trouble during the Covid period.

[Baroness Lister of Burtersett (Lab)]

I do not want to have a long debate with the noble Viscount about the pros and cons of universal credit because we would be here all night. I just point out that it may be simpler overall to have it all in one, but that does not make the one in itself any simpler. Some of the rules around universal credit are very complicated to understand because they do not always make sense. That was the point I meant to make. I am not saying that it was nirvana beforehand, but at least then an overpayment error made without the claimant knowing was not repaid, so in that sense it was better, but I will not go into any more detail about that.

Amendment 123 withdrawn.

--- Later in debate ---

[Baroness Bennett of Manor Castle (GP)]

My Lords, I rise extremely briefly and apologise to the noble Baroness, Lady Lister, that I could not be in the previous group as I was in the Chamber. I will take seconds to intervene in the interesting debate between the noble Baroness and the noble Viscount to say that, of course, if you have a universal basic income, that is an extremely simple system to administer that would not create any of these kinds of problems.

Anyway, I rise with great pleasure to follow the noble Lord, Lord Palmer of Childs Hill, and to back in particular Amendment 124, although I will be interested to hear the Minister’s response to Amendment 127. I felt I had to speak because I raised at some length in earlier discussions the case of Nicola Green. That is one case, but overall the Government have been clawing back £357 million. Hundreds of people have acquired criminal records in what I think most people would agree are entirely unjust circumstances, whatever the detail of the law. Some people now face debts of up to £20,000 or more.

This amendment—waiting until we have the review and not doing more damage to individuals’ lives and to the reputations of the Government and the Department for Work and Pensions—is a really simple, practical measure, and I commend the noble Lord, Lord Palmer, for doing this and for powerfully presenting his case. I also align myself very much with his tributes to unpaid family carers, who are doing so much in our society for what are, on a week-to-week basis, derisory sums of money for an incredible amount of labour.

[Baroness Lister of Burtersett (Lab)]

My Lords, I rise very briefly. My noble friend said that the department tries to move as quickly as possible when there is an error in payment, but, patently, that did not happen with carer’s allowance. Therefore, I am very grateful to the noble Lord, Lord Palmer of Childs Hill, for raising the issue. Part of the problem was that the DWP allowed the overpayments to accumulate until they were really significant and, given the way the cliff edge works, you could be a tiny amount over and end up having to repay the whole of your carer’s allowance. So it is a really important issue.

I want to ask my noble friend a question. Do we know when the review will be published? How quickly does the department hope to be able to move once it has been published? In a sense, that affects the practical impact of the noble Lord’s amendment.