DWP updates staff guidance on waiving overpayment recovery

The Department for Work and Pensions updated its guidance to staff in February 2022 on when it is appropriate to waive the recovery of a benefit overpayment¹. The guidance sets out an expanded list of explicit factors to be considered when deciding whether it is "fair and reasonable" to grant a waiver, and states that waiver is "normally only considered where both current and future recovery action will result in severe issues for the welfare of the debtor or their family"¹.

The change sits within a wider shift in the recoverability of overpayments caused by official error, meaning mistakes by the department rather than by the claimant. In 2010 the Supreme Court ruled that the DWP did not have the power to recover benefit overpayments caused by official error under common law¹. New powers were introduced in the Welfare Reform Act 2012 and subsequent legislation to provide for the recovery of overpayments arising from official error¹. As a result, all overpayments of Universal Credit and "new style" benefits are now recoverable, while legacy benefit overpayments caused by official error are not recoverable¹.

Corresponding powers were introduced in Northern Ireland in the Welfare Reform (NI) Order 2015, so official error overpayments of Universal Credit, new style Jobseekers Allowance, new style Employment and Support Allowance and Welfare Supplementary Payments are now recoverable there¹. The Debt Management Team within the Department for Communities has responsibility for recovering overpayments from claimants in Northern Ireland¹. Overpayments there can be waived in "exceptional circumstances" where evidenced on health or financial hardship grounds, and the department will seek recovery unless it is not cost effective to do so, it would cause undue detriment to the health and/or welfare of the claimant or their family, or recovery would not be in the public interest¹.

The factors listed in the February 2022 guidance include the debtor's financial circumstances and those of their household; whether recovery is impacting the debtor's health or that of their family; the circumstances surrounding how the overpayment arose, such as fraud, official error or DWP conduct; the debtor's conduct, including whether they took steps to mitigate any overpayment, notify DWP, misrepresented or failed to disclose any matter, or any fraudulent conduct; whether the debtor has relied on the overpayment to their detriment; whether the department intended the claimant to have the money; where the debtor can demonstrate that they did not benefit from the money that was paid; and any other factor which appears relevant to the decision maker or which indicates recovery would not be in the public interest¹.

Law Centre NI said it was concerned that the GB guidance "unnecessarily restricts the application of discretion available to the decision-maker"¹. It also said awareness of discretionary waivers remains low and that claimants are experiencing significant financial hardship as a result of overpayments¹. In Northern Ireland, 95 applications for waivers were made in 2020/21 and 86% were granted¹. In the same year, more than 8,000 people in Northern Ireland had an overpayment in Universal Credit as a result of official error, a 66% increase on 2019/20, and the department waived eight Universal Credit overpayments caused by official error¹.

Why it matters for households

An overpayment is money paid that a claimant was not entitled to, and most overpayments are recoverable, meaning excess payments must be repaid, either by a reduction in social security benefit or through a repayment such as an instalment or lump sum¹. Where an overpayment arose from official error, the position now differs by benefit: Universal Credit and new style benefits are recoverable, while legacy benefits are not¹. A claimant notified of an overpayment can ask for a mandatory reconsideration of the decision, and if the overpayment decision is upheld, recovery is effected¹. Where a claimant can argue the debt will cause significant hardship, a decision maker may consider reducing or waiving recovery, and in exceptional circumstances can waive all or some of an overpayment and any associated penalty and/or recoverable hardship payments¹. Under the February 2022 guidance, waiver is normally only considered where both current and future recovery action will result in severe issues for the welfare of the debtor or their family¹. For anyone dealing with a recovery decision, the site's guide to benefit overpayments and deductions from benefits sets out how overpayments and deductions work, and the debt section covers repayment more generally.

What happens next

Law Centre NI said the Department for Communities in Northern Ireland was due to update its guidance on benefit overpayments, and recommended that the forthcoming Northern Ireland guidance should not similarly restrict discretion, that claimants' awareness of discretionary waivers be improved, and that data collection be improved¹. No date for that update is given in the briefing¹.