Overpayments and recovery – Secretary of State waiver

Sarah Clarke describes DWP guidance on when recovery of a benefit overpayment might be waived.

Introduction
Agreement to repay
Waiving recovery
Request not to recover
In general
Reference

Introduction
Following the Court of Appeal's decision in B v Secretary of State for Work and Pensions, CPAG asked the DWP for its policy on waiver of overpayments by the Secretary of State (see Bulletin 187, p. 6). We have at last received a copy of this, and what follows summarises its contents. Download the full text here – 102 KB Word doc).

Advisers may find it helpful to address the points in the policy when requesting a waiver, although the DWP should not regard them as exhaustive, and should take other relevant factors into consideration.

Agreement to repay
If the claimant agrees to repay the overpayment, even if reluctantly, the DWP's policy is to pursue recovery. This means that where the claimant wants to ask for an overpayment to be written off, he or she should not agree to repay. The claimant may need advice on this, since if they don't agree to repay and don't request a waiver, the DWP will recover. The claimant needs to ask for recovery to be waived for it to be considered.

Waiving recovery
The guidance makes it clear that it is only in exceptional cases that recovery will be waived; those that are particularly distressing or where there is severe ill-health, and that this waiver is most likely to be considered where the overpayment was incurred in good faith. Whether an overpayment was incurred in good or bad faith depends on the claimant's culpability. Bad faith would be a deliberate failure to disclose or misrepresentation, including where there is a prosecution or caution for fraud. The fact that it has been determined that an overpayment is recoverable does not in itself mean it was incurred in bad faith.

Overpayments less than the 'small overpayment limit' of £40 can be waived by the local office. Otherwise the waiver must be considered centrally. Debt management has delegated authority to waive overpayments up to £100,000 where there is severe hardship. Waiver of recovery of overpayments of more than £1,000 on other grounds, or less where questions of principle arise, requires Treasury approval.

Cases are to be considered on their individual merits and the following factors are considered.

• The type of overpayment.
• Good/bad faith - the culpability of the claimant.
• The length of time since the overpayment was made.
• Whether recovery will have a detrimental effect, and the claimant's personal circumstances.
• Defences against recovery.
• Cost-effectiveness of recovery.
• Where a group of people have all been overpaid as a result of the same mistake, then each person should be treated equally as regards recovery.

The reasons for waiver must be documented and must be defensible to the National Audit Office.

Request not to recover
When it receives a request not to recover an overpayment, the DWP's policy is to follow these steps.

1. Did the claimant receive the overpayment in bad faith? If so, the overpayment may be waived on hardship grounds only (see below), and only where the justification is exceptional.

2. If the Secretary of State were to sue the claimant for the money in the county court, would the claimant have a defence? The guidance says legal advice should be sought where these points are raised.

a) Did the claimant change his or her position in reliance upon the extra benefit, for instance by spending it so that his or her lifestyle was altered? This could just be by buying extra or better quality food. Any part of the overpayment not yet spent can still be recovered.

b) Was the claimant told by the DWP that the money was rightfully theirs and spent it in good faith? (estoppel) This applies where:

• the claimant was told the overpayment was rightfully theirs;
• the claimant has changed their position in good faith, i.e. by spending the money;
• the overpayment was not mainly due to the claimant's error.

It could include where the claimant replies to a request for reasons why repayment should not be made and does not receive a response, or the response is delayed, leading the claimant to think that their reply was satisfactory and they could keep the money. If the claimant can establish this ground, then even if part of the overpayment is not spent, it cannot be recovered.

c) Did the claimant claim the wrong benefit, and have underlying entitlement to another benefit they did not claim? The claimant can argue that the Department intended the claimant to have the money. [footnote 1]

3. Would recovery be cost-effective? In exceptional circumstances, where the claimant challenges the Department's right to recover (it seems that what is envisaged here is a challenge through the courts), waiver may be considered if the cost of defending the action cannot be justified in relation to the size of the debt, or if there is a possibility that the case may affect others, i.e. if it is a test case or may set a precedent.

4. Would recovery cause hardship? There needs to be reasonable evidence that recovery would be detrimental to the welfare of the claimant or the claimant's family.

• On medical grounds, supporting evidence is expected to show how recovery would be detrimental to the health of the claimant/ family. This does not necessarily have to be from a doctor, but conversely, a letter from a doctor will not necessarily lead to a waiver.
• On financial grounds, details of income and expenditure are required. The response may well be to reduce the rate of recovery rather than to waive it altogether.

In general
The DWP's policy is based on, and makes a number of references to, Chapter 17 of Government Accounting, a Treasury document which can be found on the Internet at www.government-accounting.gov.uk/current/frames.htm. Advisers asking the Secretary of State to exercise discretion may want to look at it for further reference.

The Secretary of State has given us figures for the number of cases where overpayments have been waived. These are: for 2000, 86; for 2001, 117; for 2002, 110; for 2003, 72; for 2004, 50 and for 2005, 32. We do not know how many recoverable overpayments are discovered each year, although it is clear from these figures that the number of cases in which recovery has been waived has dropped dramatically since 2001.

Any request for waiver will need to be closely argued and supported by evidence where possible. It is CPAG's experience that requests for exercise of discretion may take many months to be considered.

Reference
1. Underlying entitlement to tax credits or housing benefit would not count for these purposes, because they are not administered by the DWP - see R (Larusai v Secretary of State for Work and Pensions [2003] EWHC 371 Admin 12/2/03 (Bulletin 174, p. 14) - although it could be a factor the Secretary of State could take into account in considering hardship. [back to text]

Welfare Rights Bulletin 190 February 2006