§ Order for Second Reading read.5.57 pm
§ The Parliamentary Under-Secretary of State for Social Security (Mr. Roger Evans)
I beg to move, That the Bill be now read a Second time.
The Bill arises because of a decision by Mr. Mesher, one of the social security commissioners, in a case numbered CIS 451/1995. The commissioner held that there was a need, where we review benefit because of a lie or concealment as to true circumstances, for the official then and there to determine the amount of overpayment. We are advised that this is correct as a matter of statutory interpretation of section 71 of the Social Security Administration Act 1992, which uses wording that has been in legislation since 1989. However, the consequences of that statutory construction, in terms of sound administration, are extremely serious.
What in practice happens is that when a fraud has been discovered, the local office dealing with the customer holds an interview and the truth comes out. The first decision that has to be made is to correct the benefit in payment for the future. That is the review. There are, of course, circumstances in which a spouse's earnings are declared and are found to be slightly less, so benefit goes on being paid. The situation must be put right at once in the interests of the customer and of the taxpayer, because we would not wish to go on paying benefit at a higher rate than should be paid.
At present, a specialist unit—or units—investigates subsequently exactly what has gone wrong. Classically, it may come out that somebody has been working, but there is an issue as to how much has been earned over what period. When that has been properly and fully investigated, the specialist unit determines the second decision: how much should be recovered and in respect of what period. That has been the practice of the Benefits Agency and of the Department of Social Security before it.
The effect of the decision is that that practice cannot continue. The two decisions—to review and correct the benefit and to determine the amount of overpayment to be recovered—must be determined by the same official at the same time. We have carefully considered whether it could be done if, for example, we were to throw means, resources and people at it. In practice, it cannot sensibly be done. We would have to take those cases off the main income support computer system and deal with them clerically. That would involve training staff. The House will appreciate that the main computer system deals automatically with matters such as direct payments, so accuracy would be bound to suffer. At the same time, we would have to upgrade the computer system to deal with everything at once.
All that would incur expenses—without the Bill, we would have to meet them—of about £30 million this year and £25 million thereafter. Even if we decided on that course of action, a new system could not be put in place immediately. It would take about nine months to set up. What would happen in the meantime until a new system consistent with the commissioner's decision had come into general operation? Adjudicating officers would have to continue reviewing benefit and deciding what benefits should be paid in future, but because they would no longer 1012 be in a position to make an immediate decision about the recovery of overpayment, that decision could not be made immediately and the amount lost would accordingly be irrecoverable at any stage by any means. In the process of implementing that administrative change, some £100 million in benefit would be irrecoverably lost.
It is not just an issue of whether we can operate according to the decision of the commissioner as a matter of practical common sense; we have decided that it would be wrong in principle and as a matter of sound administration. In cases of fraud, it is right and proper that the Benefits Agency should have the opportunity to investigate exactly how long that fraud has been going on and how much money is involved. That cannot be done immediately, as it may take a considerable time to establish all the facts.
We have concluded that two separate decisions are necessary—a review of the benefits to be paid in future and a later decision on the extent of the recovery of overpayment. Both decisions are taken by adjudicating officers whose determinations are appealable.
I should stress that we are discussing benefit repayment when people have lied to the Benefits Agency about their circumstances or concealed the truth. In its paperwork—order books, giro cheques and leaflets—the Benefits Agency takes great pains to explain to people that they have a duty to inform the agency of changes of circumstances as they occur.
As a matter of statutory construction I am advised that the commissioner is correct, but in practical terms it is not a satisfactory state in which to leave the law. How 1 aw and common sense became separated is, I regret to say, a matter of mystery.
§ Mr. Evans
As my hon. Friend says, it is not uncommon.
I have asked for inquiries to be made into the history of the matter. It appears that the crucial wording on which the commissioner made his decision was incorporated into the 1989 legislation by way of an amendment. The amendment was not debated and the notes on clauses are silent, so precisely how that happened is unclear.
In addition, Mr. Mesher, the learned commissioner who took the decision, has written a valuable textbook on income-related benefits, but according to the 1995 edition he clearly had not contemplated in his role of author that the problem had always been in the legislation. So it was not merely the Government and their advisers who failed to spot that point. Indeed, that is to the credit of the Department, as it appears that one of the Department's officials—an independent adjudicating officer—spotted the point and argued it for the benefit of a claimant, and the commissioner agreed with him.
I am grateful for the informal notice from the hon. Member for Manchester, Withington (Mr. Bradley) that the Opposition agree that the Bill is a practical and sensible way to put matters right.
The Bill is extremely short. Clause 1 deals with Great Britain. It simply makes it clear that the decision to review and recover may be made at separate times by different people. Of course I should stress that both the decisions are appealable.
1013 Clause 2 deals with Northern Ireland, where the legislation that creates the difficulty has the identical wording to that for Great Britain, so we need to make provision for Northern Ireland. Clause 3, with that style of parliamentary draftsmen, explains that clause 1 applies to Great Britain and clause 2 to Northern Ireland. I commend the Bill to the House.
§ 6.6 pm
§ Mr. Keith Bradley (Manchester, Withington)
I am grateful to the Minister for providing such a detailed explanation of a complicated judgment. I do not intend to delay the House by debating it at length or in detail. I also thank him for sending me a summary of leading counsel's opinion relating to the Mustard case, which helped us to decide how we should react to the Bill. As a result of both the Minister's explanation and leading counsel's opinion, we take the view that it would be difficult to appeal against a decision by the chief adjudication officer, and that the need for primary legislation is paramount to resolve the difficulty as quickly as possible.
We also support the need to introduce the primary legislation. We agree that, without it, there would be a shortfall in the ability of the Department of Social Security to recover overpayments. We also accept that the potential loss would be about £100 million over the period, or about £8 million a month. Clearly, it is not in anyone's interest to deny the Department's budget such a sum, which can be used for better purposes. On all those grounds, we are facilitating the swift passage of the primary legislation tonight.
We also understand that, as a result of the Mustard case, there would be immense difficulties in undertaking the administrative tasks associated with changing the benefit and calculating the overpayment simultaneously. We accept that further inquiries may be needed to ensure that all the evidence is available to the Department and to the overpayments section to ensure that the overpayment calculation is correct. It is in the interests of not only the Department but of claimants to ensure that all the evidence that they may want is available when the review takes place and the decision on the amount of overpayment is taken.
The Opposition also accept the argument that staff who deal with entitlement to benefit and calculation of benefit rates are not trained in the same way as those who are involved in overpayments. Although it could be argued that more comprehensive training of all staff is desirable, we recognise that such tasks are specialised. We accept that the two decisions should be separated and that the administrative arrangements currently in place to facilitate that should be continued.
We also accept that computer arrangements are not in place to enable both decisions to be taken simultaneously. That could crucially affect the accuracy of the changes to the benefit rate and overpayment, which also supports the argument for the Bill passing all its stages today.
I am not so persuaded by the argument that, if the Bill were not passed, the introduction of the jobseeker's allowance could be delayed, but I shall not pursue that point. I merely ask the Minister to update the House on the introduction of the JSA. Is it on course to be introduced in October, as the Government envisage?
1014 I also welcome the Minister's assurance that, although the Bill will separate the two actions—the action to change the benefit rate and the subsequent action to assess the amount of overpayment—claimants will still be able to appeal against them. That is important in terms of equity for the Department and the claimant, and it ensures that there is no reduction in the rights of claimants to challenge decisions on benefit rates and the amount of overpayment.
I shall probe a little further in Committee on a number of points in relation to appeals and the way in which overpayments are recovered, but it is not the Labour party's intention to oppose the Bill's Second Reading.
§ Ms Liz Lynne (Rochdale)
I shall not detain the House for long. The Bill is minor and technical and extremely necessary to claw back the money that has been obtained through fraudulent claims or by people misrepresenting the facts.
Although I cannot criticise the Bill, we must find out what will happen when overpayments have resulted mainly from official error. I should like some clarification on that. I do not honestly believe that such money should be taken back because, obviously, if somebody gets a giro cheque through the door, they will spend it. Since they have not fraudulently claimed or misrepresented the facts in their opinion, they will obviously believe that they are entitled to that money. I should like the Minister to confirm that he does not expect that money to be clawed back from genuine claimants.
While we are talking about overpayments, I should also like the Minister to address the fact that the Department of Social Security has overpaid income support by £540 million in the past year alone, mainly because of official error. I should be grateful if, when he replies, he would say what action is being taken to ensure that overpayments do not continue.
The Benefits Agency report for 1994–95 about the accuracy of income support payments makes very depressing reading. I understand that accuracy is getting worse. In 1991–92, 95.7 per cent. of payments were accurate, but, in 1994–95, 86.6 per cent. were accurate. What action is the Minister taking to ensure that that does not continue? It is not surprising that the National Audit Office has highlighted the poor performance and the difference between different benefit offices across the country.
However, as I said, the Bill is necessary to correct something that was wrong in the first place.
§ Mr. Roger Evans
By leave of the House, Madam Deputy Speaker. I should like to thank the hon. Members for Manchester, Withington (Mr. Bradley) and for Rochdale (Ms Lynne) for their welcome for the Bill. I shall deal quickly with the four points that have been put to me.
I confirm to the hon. Member for Withington that the jobseeker's allowance is on course to be delivered properly in October. I can also confirm that claimants can appeal against the decision to review and the later decision to recover overpayments.
1015 I should explain to the hon. Member for Rochdale that overpayment because of official error is a topic distinct from the subject of the Bill. I shall explain why in a moment. The important thing is that section 71 of the Social Security Administration Act 1992 concerns overpayments that have been caused—this is crucial—by misrepresentation, a positive act that is fraudulent or a failure to disclose when there is a duty to disclose.
Under the section 71 mechanism, which we are putting right in the Bill, there must be some form of culpability on the part of the claimant—he must have misled us or failed to tell us something that he ought to have done. That is distinct from when, because of official error, more money is sometimes paid than ought to have been paid. There is a discretionary scheme to compensate in circumstances of official error, when it may be necessary to satisfy the Benefits Agency that an official error has been made and, as a consequence, loss has been suffered.
§ Mr. Evans
As a general proposition, that is far too wide. I suppose that some culpability on the part of the claimant and an official error could occur at the same time. To operate the Bill's section 71 mechanism, overpayment must be caused by misrepresentation or the failure to disclose; so, we are talking about something very different. Of course, when official error occurs, it is obviously important that people could be misled by a mistake by the Benefits Agency. The scheme to compensate in such circumstances bears all circumstances in mind, including official error.
The other point that the hon. Member for Rochdale put to me concerned errors in income support. Although that is a much wider topic than the Bill, I should stress that the change programme that we are considering is designed to address such concerns, which we accept merit serious debate. I commend the Bill to the House.
§ Question put and agreed to.
§ Bill accordingly read a Second time.
Motion made, and Question put forthwith, pursuant to Standing Order No. 61 (Committal of Bills),
That the Bill be committed to a Committee of the whole House.—[Dr. Liam Fox.]
§ Question agreed to.
§ Bill immediately considered in Committee.