Recommendation 6

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.