UC overpayment deductions – an inflexible system causing destitution ​
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Louise Heath
Description: PLP
Debt owed to the Department for Work and Pensions (DWP) is pushing people into destitution, according to recent research by The Trussell Trust: Debt to government, deductions and destitution, February 2022 (the TT report). Public Law Project is calling for a system where the DWP adopts a fairer and more flexible approach that properly takes account of the circumstances and potential hardship faced by individuals.
Government debt is built into the universal credit (UC) system from the start: ‘advance payments’ are effectively loans that cover the wait between a claimant applying for UC and their first payment, and can take two years to pay back. At other times, government debt arises not by design but due to mistakes by DWP decision-makers. In the 2020/21 financial year, DWP recorded 447,000 UC overpayments to UC claimants, 337,000 of which were caused by ‘official error’. One of the main ways the DWP seeks to recover overpayments is through automatic deductions from UC. Around 40 per cent of UC claimants are having deductions applied, meaning they are receiving an income that is below subsistence level. This can cause further issues including triggering a debt spiral (as the individual is forced to take on other debt), reduced employment prospects and a deterioration of mental or physical health (see TT report, page 52).
A one-size-fits-all approach to recovery
The DWP has the power to recover all UC overpayment debt regardless of how it arose. Under UC, once a ‘recoverable’ overpayment has been identified by the DWP, recovery action appears to be taken automatically without regard to the circumstances of the claimant and the impact on them. This rigid approach seems antithetical to the public law rule against fettering discretion, which requires public body decision-makers to apply their minds to individual circumstances.
As set out in the DWP’s Benefit overpayment recovery guide (BORG) (updated 20 April 2022), while there are ways of renegotiating debt, reducing repayments or even getting debt waived, the onus is on the claimant to request this. The starting point is that the DWP system recovers automatically and does so at the maximum possible rate (25 per cent of the standard allowance for benefit overpayments). If the claimant disputes the existence of the overpayment, or the amount overpaid, they can appeal to the First-tier Tribunal. Otherwise, their only option is a request for suspension or waiver of the debt, or a reduction in the rate of recovery.
If a claimant seeks to reduce the rate of recovery (eg, from 25 per cent to 10 or five per cent), they must contact DWP Debt Management and show that they are in hardship due to the debt recovery (BORG, para 5.71–5.78). Claimants can also request a waiver of the overpayment, which is usually required to be in writing to Debt Management (BORG, para 8.2). The BORG sets a high threshold and puts the onus on the claimant, even where the overpayment was caused by the DWP’s own error. Waivers are generally only applied in exceptional circumstances and where ‘both current and future recovery’ would result in ‘severe’ issues for the welfare of the debtor or their family (BORG, para 5.88). If a reduction in the rate of recovery or a waiver request is refused, this can be challenged by way of judicial review.
Barriers to waiver
The statistics suggest that most claimants do not seek a waiver of official error overpayment debt. One problem is a lack of awareness; the standard DWP overpayment letters sent to individuals do not advise claimants of this right.
Responses to a PLP online poll of welfare benefit advisers suggested that many respondents either did not know that the DWP could waive debts or found the process unclear. No doubt a lack of proactive information from government to individuals is part of the problem (see TT report, page 30).
A better approach
Many claimants facing deductions will not realise they have the option to seek a waiver or reduction in repayment, or how to go about it. People with mental health issues and those with limited resources/time – such as single parents – may find it particularly difficult to overcome these obstacles (see TT report, page 31).
A much fairer system would be one in which DWP decision-making took a claimant’s situation into account from the outset of overpayment recovery, rather than the current ‘one-size-fits-all’ approach. Affordability of the debt, fairness of recovery to the debtor, and claimant vulnerability should be considered with the involvement of the individual before any deductions are taken from their income. The impact of decisions on certain groups, such as those with mental health problems, for whom debt is likely to exacerbate their condition, should be actively considered.
If you want to speak to PLP about these issues, or need assistance with challenging a decision to refuse an overpayment waiver please contact: enquiries@publiclawproject.org.uk.

About the author(s)

Description: Emma Vincent Miller - author
Emma Vincent Miller is a lawyer at Public Law Project.
Description: Caroline Selman - author
Caroline Selman is a Research Fellow at PLP.