HC Deb 22 May 1980 vol 985 cc818-27

Lords amendment No. 1, in page 8, leave out lines 31 to 34 and insert such modifications as are prescribed by the regulations; but any modifications so prescribed shall not apply in relation to any payment of benefit unless notice of the effect of the modifications was given to the beneficiary in accordance with the regulations before he agreed to the arrangements. In this subsection ' modifications ' includes additions, omissions and amendments.

8.23 pm
The Minister for Social Security (Mr. Reg Prentice)

I beg to move, That this House doth agree with the Lords in the said amendment.

Clause 4(4) deals with the recovery of any overpayment in cases where automated credit transfer has been used for the payment of a benefit. May I say, by way of background, that at present benefits are not paid by this method. They are paid by way of the order book or by Girocheque. There is no procedure in operation by which benefits are payable into a bank account or into any other kind of account. It is well known that the Government are considering the possibility of changes along those lines. Such changes have been discussed for some time, and they were under consideration by the previous Government.

Proposals were contained in the recent study that was carried out by our Department with the co-operation of Sir Derek Rayner which covered this and other points. Those proposals are still under consideration. In principle, we wish these changes to be brought into operation provided that we are satisfied in terms of the financial costs and administrative problems and then we can make them in a feasible way.

Undoubtedly, many people would prefer their pensions or benefit to be paid in this way. About 50 per cent. of adult people now have a current bank account, and approximately another 25 per cent. have some other kind of account, such as a Co-op account or a building society account, which could be used for this purpose if they so wish.

A recent market research exercise showed that about 2 million mothers drawing child benefit would prefer the payment to be made in this way. Approximately 1 million retirement pensioners would also prefer the payment to be made in this way. They were asked whether they would prefer a monthly payment or, in the case of retirement pensioners, a quarterly payment. Clearly, we would be meeting the wishes of a number of pensioners and beneficiaries if we were able to introduce this change.

I turn to the problems which would be created by the clause if an overpayment of benefit occurred. There is a problem of recovery. In Committee, the clause in its original form was criticised on the ground that it provided inadequate safeguards in the arrangements for recovery of overpayments to beneficiaries paid by an ACT, if I may so abbreviate the term automated credit transfer. An ACT would involve a greater risk of overpayment, because there would be less routine contact between beneficiaries and the Department, and more beneficiaries may overlook the need to report changes of circumstances that would affect their benefit entitlement. If benefit was credited by computer to a beneficiary's account, he would be unable to prevent overpayment in the way that a person with an order book can, by simply not cashing it.

Dealing with overpayments under existing law is a time-consuming process. Overpayments are not recoverable if the beneficiary shows due care and diligence. Consequently, there has to be a procedure for obtaining the beneficiary's written observations before the matter is formally referred to the insurance officer for a decision. Any appreciable increase in the number of overpayments as a result of ACT would involve extra cost and work and would jeopardise the acceptability of the system from the point of view of the responsible use of taxpayers' money. If a service that many beneficiaries want is to be provided, it is essential that it should be possible to operate it without undue expense.

The object of clause 4(4) is to provide, for the purposes of ACT, a method of recovering overpayments that would be inexpensive and efficient but, at the same time, reasonable from the beneficiary's point of view. It enables the due care and diligence rule, which is contained in section 119 of the Social Security Act, to be suspended if a person chooses payment by ACT.

Beneficiaries will have a free choice as to whether they want benefits paid by this method, and they will be able to change if they later decide that they do not like the new system. Those who choose ACT will, in their own interests, have voluntarily chosen the system under which they will not receive normal reminders to report changes of circumstances. Nor will they have the normal facilities for preventing payment.

The amended version of clause 4(4) seeks to meet objections that were raised in Committee by strengthening the sale-guards for beneficiaries. The main safeguard now introduced underlines the voluntary nature of ACT by ensuring that arrangements for suspending the due care and diligence test cannot, as a matter of law, apply to a beneficiary unless he is given due notice of their effect before he agrees to payment by ACT. He will be informed in writing that overpayments will be recoverable, whether or not he is personally to blame. If he is not prepared to accept this condition, he will not accept payment by ACT and he will be subject to the ordinary rules for recovery of overpayments.

The amended version of clause 4(4) also provides wider regulation-making powers, which will be used to enable other features of ACT to be spelt out. For instance, it is proposed that the beneficiary under ACT will be told, when an overpayment comes to light, of the circumstances of the overpayment, the amount and the Department's intention to recover it—which, if possible, will be done by reducing any future sums to be credited to his account.

These procedures will also be explained to him before he decides whether to opt for ACT, and, in particular, before he decides he will also have to be advised of the maximum amounts that may be compulsorily recovered by deduction from future payments.

A very important safeguard is that the clause does not remove the beneficiary's right to ask for a decision of the insurance officer if he disputes that there has been an overpayment or if he challenges the amount, and he will be informed of this right whenever an overpayment occurs. He will then have the normal right of appeal to a local tribunal and thence to a commissioner.

Finally, regulations made under this amended clause will have to be referred to the National Insurance Advisory Committee or, after its abolition, the new Social Security Advisory Committee which will be created under the Bill.

For the reasons I have given, I hope that the House will agree that the amended clause meets the criticisms levelled at the original version and that it will support the Lords in this amendment.

8.30 pm
Mr. Stanley Orme (Salford West)

I am a little disturbed and more than a little perplexed by the emphasis which the Minister has again put on paying benefits through the banks and his reference to the report of the Rayner committee. He will remember the great consternation that was created because it was felt at that time that pressure would be put not only on pensioners but on people entitled to child benefit to accept the payments on a fortnightly or a monthly basis and have them made through bank accounts, and the perhaps misplaced feeling that this might be on a compulsory basis.

The Minister will remember that there was a great deal of argument and a debate in the House on this issue. After a little equivocation by the Secretary of State for Social Services, we had a very clear statement from the Prime Minister to the effect that the Government would not proceed with the Rayner recommendations. I should like some clarification. From what the Minister has said, it appears that the Government have an open mind on the matter. I am sure that the Minister does not want to reawaken all the problems and difficulties expressed by sub-postmasters, whose fears were raised in relation to the payment of benefits.

This is a very important issue. It concerns the payment of benefits to millions of beneficiaries. How they receive the payments is very important. Pensioners in particular feel very strongly about any change. The vast majority of them like to obtain their benefits weekly in cash. In consequence, they were very fearful—[Interruption.] Perhaps the Under-Secretary will listen to what I am saying. If she is to reply to the debate, she will do so. If not, I should be obliged if she would listen.

Although it was made clear that there would be no compulsion, that it would be done on a voluntary basis and that transfers would not take place except on that basis, nevertheless pensioners' fears were raised and the feeling got abroad that there was an element of pressure in the idea. We had to have a major debate in the House, and finally we had a statement from the Prime Minister. My hon. Friends will be aware of the lobby that we had from sub-postmasters, and we all remember our postbags at the time.

I hope that the Minister will be more forthcoming. The Rayner proposals were based on saving public expenditure. They were not made for the convenience of the recipients. I hope that the Minister will say that the proposals are dead and that the Government will not pursue them. Beneficiaries are now of the opinion that the Government have backed away from the proposal to have fortnightly or monthly payments and to put pressure on people to have payments made through bank accounts. I should like the Minister to refer to that. I do not know whether any of my hon. Friends wish to speak on that issue.

My second question is about overpayment and the special powers of recovery which the Minister is taking but which are not applicable to the normal payments through the post office. Will the Minister give us an estimate of the overpayments by his Department? Are they extensive? Does he have any figures calculated on a yearly basis? We are entitled to know the scale of the problem. If he is taking powers under the automated credit transfer system to recover money, we assume that there is a considerable number of errors. We should like to know the scale of them.

There was a full debate in the other place on this amendment. We are entitled to ask two questions of the Minister. What are the Government's intentions? Will the emphasis be on banks rather than on post offices for payments? If the Minister says that that is so, he is going back on the assurances given to the House, not least by the Prime Minister. In answering that question, perhaps he will give us some figures of the estimated number of cases and the amounts involved. I appreciate that the payment of benefits to a large number of beneficiaries is a big exercise. We should like to know the scope of the exercise and what it entails.

Mr. Andrew F. Bennett (Stockport, North)

In Committee, we pressed the Government fairly hard to make some changes in the clause. It is disappointing that the Lords proposals do not go very far to meet our objections.

It is ironic that the Government brought in Sir Derek Rayner, supposedly to bring some more efficiency to the Government. It is noticeable that since he has been away from Marks and Spencer that firm has not done particularly well. Perhaps it would be better if he went back and helped it to solve its problems. He allowed himself to be associated with a scheme to introduce direct payments into the banks by the ACT method, which the Government now say will be less efficient and less accurate than the previous system of payments. If the Government are to introduce a new system, they should at least start off with confidence that the payments will be more rather than less accurate. It is unfortunate if they admit that the system to be introduced could be more inefficient and that there may be more errors and mistakes.

In Committee, the Opposition asked for assurances—we still want them—that people would not suffer hardship as a result of the direct right to reclaim overpayment. This is the kind of mistake that is likely to occur. Where a payment should be for £7, it may well be paid out for a substantial time at £70. That kind of mistake can fairly easily occur with computer payments.

If the extra 63p was paid for a couple of years before the mistake was discovered, a substantial sum would be involved. The right to take back that money without going carefully into the circumstances of the individual householder and whether taking the money back would cause hardship should be exercised rarely.

We want categorical assurances from the Government that if they intend to use the automatic right to reclaim money, it will be done only if the individual concerned gives permission for the money to be taken back and that the Government will ensure that no hardship is created. So far, we have not been given that assurance, and the amendment does not provide it.

The amendment provides that in the small print of an agreement to have money paid by the new method individuals will waive some of their present rights. That is not satisfactory. Many people do not read the small print, and they will be aggrieved when they have money taken back from them.

Instead of taking the big business attitude of putting in a line of small print saying "Beware, this is what could happen if you go over to a new method of payment ", the Government should give us a clear assurance that the money will not be taken back if that will cause hardship and that money will be taken back only with the agreement of the person concerned.

Mr. Prentice

By leave of the House, I shall reply to the debate. The right hon. Member for Salford, West (Mr. Orme) said that he was worried because we were apparently putting renewed emphasis on payment through the banks. In fact, provided that the remaining administrative problems can be sorted out, we shall seek to give people a right to choose to have payments made into a bank account.

I think that the right hon. Gentleman was quoted in Committee as saying that he saw that proposal as desirable in principle. As I said earlier, a research survey has shown that about 1 million retirement pensioners and 2 million mothers drawing child benefit would prefer to receive benefits through a bank account. What is wrong with enlarging choice, provided that it is voluntary?

Mr. Orme

In principle, I am not opposed to the payment of benefits into bank accounts. The problem arose because the Government got that involved with other Rayner proposals affecting child benefits and retirement pensions that led to speculation that they would be paid fortnightly or monthly. That put in jeopardy the role of sub-post offices, because it appeared that the numbers would be severely depleted because of the transfer of business. That is where the problem arose.

Mr. Prentice

Exactly, but, as the right hon. Gentleman reminded us, we debated the matter on the Floor of the House and the subject has been raised on many occasions at Question Time, including Prime Minister's Question Time. Specific guarantees have been given that no compulsion will be applied to any group in respect of changes in the method by which pensions are paid.

There was anxiety about whether retirement pensioners would be forced to receive their pensions at fortnightly or longer intervals instead of weekly. It has been stated specifically that that will not be pursued. The idea was opposed by many retirement pensioners and other beneficiaries who are accustomed to weekly budgeting and want to keep it that way. It also caused anxiety among sub-postmasters. That is why a clear and specific guarantee has been given that those possibilities will not be pursued.

8.45 pm

The report covered a wide range of topics. It is still being studied. We have isolated certain aspects about which anxiety has been expressed. We have said that we will not do those things. I should have thought that it would be superfluous for me to repeat that commitment. We do not intend to make the type of decisions that have aroused anxiety. We shall not put pressure on people to use a different method of receiving their benefits and pensions. It is a question of enlarging their choice. I should have thought that hon. Members from all parties would welcome that.

I was asked whether I had an estimate of the amount of overpayments. I have a figure for irrecoverable overpayments for 1978–79. Those overpayments amounted to approximately £18 million. I do not have a figure for the amounts that were recovered. If automated credit transfer is introduced, and if many people use it, there is a strong possibility that overpayments will go undetected for longer periods. If an honest recipient saw that his pension book was wrong, he would immediately say something. However, he might not be aware for some time that excessive amounts were being paid into his account. A new approach was needed. The clause provides it.

In Committee, it was suggested that we were not providing enough safeguards for the claimant. However, amendments passed in the other place have given the guarantee that hon. Members sought. I thought that the hon. Member for Stockport, North (Mr. Bennett) went too far when he said that the repayment of overpayments should always be voluntary. I think not. He should recognise that when anybody receives an overpayment from the State, or from anyone else, there is an obligation to repay it The hon. Member asked for a reassurance about hardship cases. I gladly give him that assurance. It has always been the policy that recovery action should not be pursued if it would cause undue hardship. If a beneficiary's response to an overpayment notification suggests that severe hardship might follow, the full facts will be ascertained. Recovery will not be pressed if it causes hardship. The rule applying to existing procedures will apply to these cases.

I do not accept that automated credit transfers will be less efficient. As I have said, many beneficiaries would prefer that method. The Department might make some small administrative savings. This system will be more efficient. Indeed, the only sense in which it may be marginally less efficient is that there is a slightly greater chance that overpayment will remain undetected for longer periods. That is the point that we are trying to meet. I believe that we are doing so as fairly as possible.

Question put and agreed to.

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