Source · Select Committees · Public Accounts Committee
Recommendation 6
6
As at 31 March 2020, the Department was owed £5.3 billion from benefit overpayments, benefit...
Recommendation
As at 31 March 2020, the Department was owed £5.3 billion from benefit overpayments, benefit advances and Tax Credits debt. This number continues to increase rapidly. As at 31 March 2020, the Department was owed: benefit overpayments of £2.6 billion; benefit advances of £1.0 billion; and Tax Credits debt of £1.8 billion. This represents a significant annual increase of 39% (£1.5 billion) on the £3.8 billion owed as at 31 March 2019, and the amount owed to the Department is expected to increase further as Universal Credit expands and it takes on more Tax Credits debt from HM Revenue & Customs. The amount owed to the Department will have also risen when the Department temporarily suspended most debt recovery in March 2020 as direct response to the COVID-19 pandemic (it only reintroduced the recovery of new overpayments in late September). Although the Department claims that “there are cases where things are written off, but they are exceptional cases”, the reality is that around £290 million of non-recoverable benefit overpayments were written-off in 2019–20, with an additional £7 million relating to customer fraud also written-off. Furthermore, the Department accepts it will not be able to recover a significant portion (44%) of its existing benefit overpayments and Tax Credits debt, recognising a £1.9 billion impairment in its accounts. Recommendation: The Department should set out clearly in its Annual Report and Accounts, starting 2020–21: the methods open to it to recover debt; the efficacy of each of these methods on recovering different types of debt; and its expectation of its recovery of different types of debt which are accumulating due to overpayments and be clear about the resources required to deliver on its targets.
Government Response
Not Addressed
HM Government
Not Addressed
The government agrees with the Committee’s recommendation. Target implementation date: July 2021 6.2 The department can recover debt in various ways, including directly from benefits, from earnings via a Direct Earnings Attachments, or ultimately, from a debtor’s estate. 6.3 Overall deductions policy is complex. Recovery is increasingly made via Universal Credit payments. The purpose of the overall deductions policy in Universal Credit is to both safeguard the welfare of claimants who have incurred debt and to provide a cost effective and efficient mechanism to recover outstanding overpayments. 6.4 Regulations protect claimants from excessive deductions. From October 2019, the overall maximum level of deductions that can be taken from Universal Credit was reduced from 40% to 30% of the Standard Allowance. This will decrease to 25% with effect from October 2021. Equally, through the priority order for deductions, the department seeks to protect vulnerable claimants by providing a repayment method for arrears of essential services. This means that the debt rate can only be calculated once other deductions have been taken into account. 6.5 The department is improving operational efficiency via, for example, Repay My Debt, which will enable customers to pay their debt online and increased automation of processes. The department is also developing data analytics to facilitate a more proactive approach to managing financial hardship. 6.6 The department will look to provide additional information in its annual report and accounts to show the different recovery options, the sums attributable to each method and outstanding debt stock.