UC overpayments – Disincentivising fair decision-making

In the wake of the pandemic, more money than ever is being overpaid under the Universal Credit (UC) system. Blunt rule changes to the recoverability of overpayments mean that people are being saddled with debt as a result of structural deficiencies and delays in the decision-making process. As Z2K’s casework highlights, this leaves people in vulnerable circumstances in an impossible situation.

30 June 2021

Andy McCarthy, Casework Manager

Department of Work and Pensions (DWP) statistics published last month show that benefit overpayment rates are soaring. Last year, 3.9 per cent of benefit expenditure was overpaid (£8.4 billion) – up from 2.4 per cent the previous year.

As for DWP’s flagship UC, the overpayment rates are even more troubling. The rate of overpayment is 14.5 per cent, an increase from 9.4 per cent the previous year, which the report called “statistically significant”.  Nearly a quarter of people on UC have been overpaid.

And this has real world consequences for those people trying to get by. The most that can now be taken from UC payments each month is 25 per cent of the Standard Allowance. This is currently a deduction of up to £102.87 a month for a single adult over 25. This is a marked divergence from legacy benefits including income-related Employment Support Allowance, Job Seekers Allowance, and Income Support where the maximum deduction is £48.75 per month (£11.25 per week). Equally concerning is that when the £20 uplift took place under UC, for many this was only a £15 uplift as a quarter was siphoned straight out of their payments.

The problem is that there is now very little incentive for DWP to rectify overpayments arising from official error. With Z2K’s help, Malik* informed the DWP he was being overpaid UC. Despite being informed in December and multiple times afterwards, DWP did not change his entitlement until the following May. Malik was left in an impossible situation; don’t spend the money and try your best to survive on the little you get after advance repayments and other deductions, or spend the money he was given knowing he would then live in debt for longer.

Under the old legacy system there was a remedy for client’s caught out by DWP or local authority maladministration. For Housing Benefit, the rule has been overpayment “which arose in consequence of an official error where the claimant or a person acting on his behalf…could not…reasonably have been expected to realise that it was an overpayment”, the overpayment cannot be recovered. For other means-tested benefits, the test is whether “misrepresentation or failure to disclose” caused the overpayment.

Under UC however, the rules have changed so that any overpayment, even if caused solely by official error, is recoverable. On the surface this may seem like good economic management. But our casework has highlighted that this almost disincentivises fair and timely decision making, as people almost always have to pay back whatever is overpaid. This means that in cases like Malik’s, resolutions can take months and people end up even deeper in debt through no fault of their own.

In place of any rules on official error, DWP has instead introduced a discretion to waive UC overpayments if they cause hardship. The DWP response to this decision rings as familiar: “the discretion to waive benefit overpayments can only be exercised in line with HM Treasury’s guidance on ‘Managing Public Money’.”  Notably absent from guidance on this discretion is any mention of official error. As it turns out, only eight UC overpayments were waived in three years.

It is clear that the UC experiment in overpayments being always recoverable has not worked. The system has not reduced the amount of people being overpaid, or the amount of DWP maladministration and error. In fact the amount of benefits overpaid is at an all-time high. DWP is now in the process of verifying claims made during the pandemic related easements under their Trust and Protect scheme, which will inevitably identify more overpayments, many caused by official error, leaving people already struggling to foot the bill.

We will continue to uphold the call made in our report ‘Blunt, bureaucratic and broken: how Universal Credit is failing people in vulnerable situations’, that demands official error rules are reinstated in UC as it is in the legacy benefit system, so that such overpayments are non-recoverable. This would both place an incentive on the DWP to stop making erroneous overpayments and ensure that individuals are not the ones who are placed at a disadvantage as a result of DWP error.