Memorandum submitted by Neil Bateman (DM 01)

Summary

Standards of decision-making by both the DWP and local authorities about benefit overpayments in benefit fraud prosecutions are poor, leading to inflated amounts being adduced in evidence before the criminal Courts.

These in turn lead to people receiving higher sentences, including custodial sentences which they should not have received.

There are additional barriers to having reconsiderations and appeals dealt with in a timely manner in such cases.

1. I am a freelance welfare author, trainer and consultant in welfare rights and social policy issues with over 30 years experience. I undertake work for many different organisations and their service users and I have built up considerable experience of undertaking expert witness investigations for the criminal Courts in benefit fraud prosecutions. Since 2006 I have completed assignments in 66 such cases and I continue to receive instructions, including approaches by defence solicitors who have been given my name by DWP lawyers.

2. This Memorandum of Evidence focuses on the poor standards of decision-making concerning benefit overpayments in cases where people are prosecuted for benefit fraud offences. It is based upon my experiences over the last two years as an expert witness in benefit fraud prosecutions.

3. The DWP's own evidence shows that in 2003 (the latest published date that I am aware of) just 67% of benefit overpayment decisions were correct [1]. This reflects the average success rate of appeals against overpayments before social security Tribunals of 32%, increasing to 63% when someone is represented [2]. These figures alone should sound alarm bells in cases where an overpayment is alleged to have a fraudulent element. In the 12 months ended March 2009, in England and Wales, there were 8,701 prosecutions, 14,320 cautions and 7,160 Administrative Penalties. 463 people received custodial sentences and there were additional confiscation orders made in 135 cases [3].

4. Of the 66 cases which I have investigated, I have found just five where the overpayment amount was accurate and two where it was understated. In all other cases the overpayments have been inflated - usually significantly so and errors in the amounts of a factor of twenty are not uncommon.

5. I am usually instructed in cases where there is a risk of custody (i.e. where the amount is more than 20,000) and to date, just two clients have received custodial sentences following my reports.

6. Furthermore, as a result of my reports, a number of cases have resulted in prosecution action being discontinued or clients receiving very light sentences because I have demonstrated that the alleged overpayments were wildly exaggerated.

7. Normally, the Prosecution agrees my reports. This suggests a tacit admission that the amounts were wrong to begin with. There are very few other welfare rights experts people who undertake similar work in prosecutions and very few cases before the Courts are independently scrutinised by a benefits expert.

8. I have become increasingly concerned about the evidence of routinely poor quality decision-making in benefit overpayments. Because the amount of a fraudulent benefit overpayment is crucial to sentencing, It is my view that the majority of the 463 people who received custodial sentences for benefit fraud in England and Wales in the year ended 31 March 2009 should not have been sent to prison and they are in jail primarily because of poor quality decisions about overpayments which lead to significantly inflated amounts.

9. Exaggerated amounts of fraudulent overpayments also affect DWP and local authority performance figures, show as debt on official balance sheets, affect the amount of housing benefit subsidy which can be reclaimed by local authorities and they add to the public misconception that benefit fraud is wide scale and involves great sums. They also suggest to Ministers and DWP officials that greater amounts may be saved by bearing down on benefit fraud than is actually the case.

10. Inflated fraudulent overpayments above 20,000 also frighten some defendants into entering inappropriate not guilty pleas, resulting in a heavier sentence when convicted and considerable extra legal costs for the public purse, which are rarely recouped. They also take up considerable Court time, thus delaying other cases.

11. I have previously raised my concerns with a number of senior DWP officials and directly with the Secretary of State, the Chairman of this Committee and the Chairman of the Public Accounts Committee. I have offered to meet DWP officials Ministers (including the current Secretary of State) and officials to discuss my concerns, but as at the date of writing, no invitation to a meeting has been forthcoming.

12. I believe that the Secretary of State for Work and Pensions and the Secretary of State for Justice need to take urgent and meaningful action to address the concerns I raise in this Memorandum because the evidence from my investigations shows that the Courts are being routinely provided with severely inaccurate evidence concerning the amounts of an overpayment and people's alleged non-entitlement to benefit.

The effectiveness of the decision-making process

13. There appears to be a pattern of poor quality decision-making concerning both the amounts and recoverability of benefit overpayments as well as poor quality control and scrutiny of these decisions.

14. The errors I frequently come across include:

A failure to apply the "underlying entitlement" rule in Housing Benefit and Council Tax Benefit overpayments (i.e. the amount which would be properly payable had the person's circumstances been known to the local authority). This reduces the actual overpayment.

An elementary error is for local authorities to often decide that no Housing Benefit/Council Tax Benefit is payable when it has been decided that someone is retrospectively not entitled to Income Support or Income Based Jobseeker's Allowance. There is also a failure to use evidence within the Court bundle and elsewhere concerning the claimant's circumstances which show that there was at least some entitlement to HB/CTB thus producing a much lower overpayment.

A similar rule to consider any Income Support, income based Jobseekers Allowance or guarantee credit of Pension Credit also applies to DWP benefits and is also frequently overlooked.

Miss Z pleaded guilty to offences connected with not declaring that she was living as husband and wife with her partner. It was alleged that she had been overpaid 18,903.25 Housing and Council Tax Benefits and 28,135.28 Income Support, making a total of 47,038.53 which would led to a significant custodial sentence.

I showed that the local authority had incorrectly assumed nil entitlement when her Income Support was stopped and had failed to even use evidence of income before them. The correct HB/CTB overpayments should have been 702.78. I also showed that the Income Support overpayment was inflated by 3,666.78 because the DWP had also failed to offset entitlement to Jobseekers Allowance for periods when her partner had been unemployed. In addition, there was notional underlying entitlement to tax credits which produced a net saving to public funds for sentencing purposes.

The DWP Solicitors agreed my report and Miss Z received a conditional discharge and the Crown Court Judge only awarded half the Magistrates Court fixed costs because the matter should have been dealt with in that Court if the Prosecution had "done their job properly".

I have had numerous similar cases.

 

Failing to apply the diminution of capital calculation which is required for both local authority and DWP benefit overpayment calculations when someone has had undeclared capital. I have seen statements of decision makers to the effect that there is "no point" applying the calculation and it has been apparent in other cases that some decision makers simply do not understand how to do these calculations. The law gives the decision maker no choice but to perform such a calculation even though at first sight it may appear that there is little advantage. The calculation can produce dramatic reductions in the amount of an overpayment.

Mrs Y was convicted of benefit fraud offences including ones about undeclared capital leading to an alleged overpayment of more than 10,000 HB/CTB. The local authority failed to undertake a diminution of capital calculation, then after seeing my report, performed one and did it incorrectly by failing to "bring forward" diminished sums within the calculations. If it had been done correctly, it would have reduced the overpayment by more than half.

Ms X was overpaid more than 30,000 Income Support because of undeclared capital. The decision maker recorded that there was "no point" in carrying out a diminution of capital calculation despite the legal requirement to do so. The prosecution was discontinued because of missing evidence unconnected with this. Ms X's solicitor's records show that he did not query the amount of the overpayment and did not refer her to an expert advice agency, this irregularity only coming to light outside the 13 month appeal time limit.

Elementary errors in calculations. I have investigated several cases where both DWP and the local authority have made elementary mistakes in the decisions concerning non-entitlement which inflate the amount of an overpayment. These include, failure to use net earnings when people have been in work and use of gross earnings instead, assumptions being made about earnings if evidence is unclear, a failure to apply the correct earnings disregards, failing to include appropriate premiums and personal allowances in the applicable amount calculations. Ms W was prosecuted for offences in connection with working while claiming Incapacity Benefit and Income Support. The alleged associated fraudulent overpayments were 4,216.80. From the papers, it was clear that Ms W had actually been underpaid Income Support and Child Tax Credit both before, during and after the alleged offence and that appropriate (and easily identifiable) premiums had not been included in the calculation of her Income Support entitlement.

The DWP conceded that the amount was incorrect and reduced it to 2,482.00 to take account of their errors.

Mr V was charged with offences concerning working while claiming various benefits. It was alleged that the overpayments included 23,045.76 Income Support, 1,750.88 Housing Benefit and 405.90 Council Tax Benefit. Both DWP and the council had used his gross earnings to calculate the overpayments. When his net earnings were used (as should have happened from the start), the overpayments reduced to 18,028.39 (Income Support, 491.33 Housing Benefit and 152.54 Council Tax Benefit. There was also notional underlying entitlement to tax credits for sentencing purposes which had not been mentioned by the prosecutor and which significantly reduced the loss to public funds. There was local publicity about the case, but no mention of the errors made by DWP and the local authority. Mr V was sentenced to a conditional discharge and the Judge in the case expressed concerns that unless Mr V's defence team had not done such diligent work on the case, there would have been a very different outcome.

 

Errors in dates. I have had numerous cases where the alleged overpayment dates between different benefits differ, by weeks and even months. Another very common error is for the DWP to assert that a benefit overpayment after the date that they were aware of the correct circumstances is recoverable from the claimant. This is contrary to case law and is normally rectified when my report has been served on the Prosecution. In other cases, I have found simple errors in dates and including dates of overpayments when there is no evidence to support such a date.

Mr U was convicted of offences connected with failing to declare an occupational pension on his HB/CTB claim forms over several years. I was instructed to prepare an expert report on the case and I asked for a breakdown of how the alleged 36,958 overpayment had been calculated. This was initially resisted by the prosecuting solicitor but then provided. At which point the overpayment was reduced to 23,656. The decision maker who made the first decision had wrongly assumed that Mr U had been receiving a far higher amount of HB CTB that was the case. As Mr U was in his seventies and in poor health, this reduction alone was sufficient to make the difference between a custodial and non-custodial sentence.

Another common error arises in cases when people who are incapable of work for Income Support purposes or where it has been decided that someone has been living together as husband and wife/civil partner/married couple. Even though someone who is incapable of work has been working for more than 16 hours a week, they may still quality for Income Support on the grounds of being a "disabled worker". According to caselaw, decision makers should automatically consider this, and if necessary make further enquiries, but they appear to routinely fail to do so. Similarly, the fact that someone is living together as husband and wife does not mean that they no longer necessarily qualify for Income Support. For example, one of the couple may be a carer or be incapable of work. Decision makers appear to overlook this on a regular basis.

In decisions about "living together" cases, DWP decision makers often place too much emphasis on someone's presence in a household and fail to examine all the aspects of someone's relationship before reaching the conclusion they are living together as husband and wife. Again, case law holds that decision makers should go on to consider the other elements in the case of unmarried couples but they appear to fail to do so. This practice particularly discriminates against women in dysfunctional relationships.

I have had cases where decision makers have also misunderstood rules about capital - for example taking moneys into account as capital which should indisputably be ignored, don't appreciate the basics of money held on trust for other people (which should therefore be ignored as belonging to the benefit claimant) and an over simplistic approach to cases where people have disposed of capital, with decisions being drawn that people did so deliberately in order to claim benefit.

Failing to offset payments made to the Child Support Agency by ex-partners. In cases where someone has been overpaid a means tested DWP benefit, such as Income Support, if an ex-partner has been making payments direct to the Child Support Agency these should be offset against the gross overpayment in order to avoid double counting. If payments had gone to the benefit claimant rather than the CSA, less benefit would have been paid in the first place, thus reducing the subsequent overpayment. Information about such payments is readily available to DWP staff if they investigate. I have had cases where it significantly reduces the alleged fraudulent overpayment.

Ms T was convicted of offences connected with running a business while claiming Income Support and Incapacity Benefit. The total alleged criminal overpayment was more than 32,000. After receiving my report, the decision maker conceded that more than 15,000 in payments of child maintenance direct to the Child Support Agency by Ms T's ex-husband should be waived from recovery of the overpayment of Income Support in order to avoid double re-payments to DWP. However, the DWP took ten months to make this decision after I first raised it with them and about 18 months after Ms T had raised it with them and it was made after Ms T was both convicted and sentenced. Fortunately she did not receive a custodial sentence.

 

Failure to change the original entitlement to benefit. It is a clear requirement that unless the benefit claimant's entitlement to benefit is altered by a specific decision, using the correct grounds and unless that decision is notified to them in accordance with the law, there is no overpayemnt as matter of law and no power to recover any overpayment. A frequent failure by decision makers is to fail to change the original entitlement and/or to notify the benefit claimant. These arise in over 80% of the cases I examine, with several where Appeal Tribunals have held that there is no power to recover any overpayment, after someone has been convicted and sentenced.

It is not uncommon to find HB/CTB overpayment notices which are defective and fail to comply with the law, sometimes these fail to mention rights of appeal and I've even seen cases where no overpayment notice has been issued and invoices have been issued instead. Again as a matter of law, there is no power to recover any overpayment and indeed, no overpayment exists, until it has been properly notified in accordance with the law.

Allowing an overpayment to continue after the material fact is known: this is another very common error which inflates benefit overpayments and also increases the loss to public funds. It is settled law that when the "paying office" of the DWP are aware of material fact which causes an overpayment, no overpayment after that date is recoverable from the benefit claimant. It is common to see cases where investigators or other staff acting on behalf of the paying office were aware of the correct facts of case and, for good or bad reason, they failed to take timely action to stop payments. In the case of HB/CTB such overpayments should be classed as official error overpayments (and thus not part of the defendant's criminal liability), but may still be recoverable at civil law. The facts in many fraud cases are known significantly before the overpayment ends.

Mrs S was convicted of offences in relation to claiming benefit with a stolen identity. The person whose identity had been used had reported this by visiting her local DWP office in February 2003. She then reported it again in June 2005. Even though these facts were known and not in dispute, the DWP decision maker counted the recoverable overpayment as continuing until June 2005. This wrongly added over 24,000 to the fraudulent benefit overpayments of over 100,000 and was removed for sentencing purposes. There were various other errors in the amounts.

 

Are there sufficient decision makers and is the training they receive adequate?

15. The poor quality of decision making I have come across suggests that the training is inadequate as is the supervision and line management of decision makers. There appear to be insufficient numbers of experienced decision makers and too many cases where decision makers have an incomplete grasp of law.

 

Is the decision making process clear to claimants?

16. I would suggest that the decision making process is unclear. In the case of overpayments, the process is complicated by:

The use of a postal address in Gloucestershire by DWP's Debt Management Service;

The operational split between staff handling calls from advisers and the public and those making decisions;

The flouting of DWP's policy of working with Customer Representatives by staff who refuse to talk to advice workers and other professionals. This has been raised repeatedly at national level with DWP officials but persists as a barrier to resolving disputes.

The need for people to appeal against an overpayment by contacting DWP Debt Management Service who then pass the matter to a Benefit Delivery Centre. Such hand-offs of work result in delay and lack of clarity about who is responsible. They also increase the likelihood of error.

Delays in decision making

17. I am extremely concerned that in the cases where I have prepared reports, there appear to be extraordinary delays before a DWP decision maker reconsiders the case. In one case, the decision maker made a statement that there is no process for prioritising decision making in cases being prosecuted (I have since had this confirmed in writing from the head of DWP Debt Management). Not only can this cause delays in the Criminal Courts, but it can mean that cases are proceeding in the Criminal Courts under the auspices of DWP solicitors, while another part of the DWP is stalling a decision on changing entitlement and/or amount or recoverability of an overpayment. It surely cannot be beyond the wit of the DWP to arrange to fast track reconsiderations of decisions when the case is being prosecuted. It is in no-one's interests for there to be such delay and there is a major risk that inflated amounts are in evidence before the Courts.

18. I have also experienced several situations where even though my report has been served on the DWP's Solicitor with a request that it be referred to a decision maker to reconsider the overpayment, this does not appear to have occurred, even in cases where my report is agreed for criminal proceedings. My concern is that defendants are left to repay amounts they are not legally liable for. Above all, because the overpayment decision is used as one of the building blocks for a prosecution, it is wholly wrong for it not to be formally corrected when it is clear that it is incorrect.

Amount of loss to public funds

19. While it may be beyond the remit of this Inquiry, I am very concerned that DWP and local authority prosecutors routinely fail to alert Courts or the defence to the possibility of "notional underlying entitlement". This is where, for example, someone who had been working while claiming or otherwise not entitled would have been otherwise entitled to benefits and tax credits. The Court of Appeal has held that such notional underlying entitlement is a relevant matter for sentencing (R v Parmer). Very often, by the time notional underlying entitlement calculations are done, the actual loss to public funds (though not the actual overpayment of benefit) can be very small or even nil even in cases where people are alleged to have been overpaid more than 20,000.

20. Notional underlying entitlement, on its own, can make the difference between a custodial and non-custodial sentence.

21. Of course, in order to accurately calculate notional underlying entitlement and the true loss to public funds it is necessary for the decisions concerning both non-entitlement and the overpayment to be accurate in the first place.

 

Why does this happen?

22. I believe that the DWP's longstanding problems with human resource management are a major reason why standards of decision making are inadequate. Systems for rigorous quality control in such cases (which are an absolute must given the consequences for the defendant) appear to be weak and both DWP prosecution lawyers and fraud investigators often have limited understanding of social security law - I have had several openly state this to me.

23. The culture of politicians wanting to be seen to be tough on benefit fraud means that ensuring that the overpaid amounts are accurate has received less priority than detection, prosecution and publicity. And larger amounts do make for bigger headlines.

24. Both the Courts, the Prosecutor and the Defender are completely reliant on the competence of benefit decision makers.

25. The situation is compounded by the fact that criminal defence solicitors rarely have the skill and knowledge necessary to effectively query the amount of the alleged fraudulent overpayment and/or non-entitlement and because of changes to legal aid funding over the years, they would not usually have the resources to do this work themselves even if they have the ability and knowledge and the fixed fees regime which has recently been introduced in legal aid mitigates against defence lawyers going the extra mile for their clients. Very few cases are referred to experts and criminal law solicitors routinely fail to get their clients to appeal against alleged fraudulent overpayments. (Something I wrote to the President of the Law Society about in January 2009, but to date have not had a response).

26. Furthermore, most independent advice agencies feel overwhelmed with other work and have difficulty finding the time to devote to rigorously examine benefit overpayments. This is also a specialist area where many welfare rights advisers would readily admit they did not have sufficient knowledge themselves.

Appeals

27. I am concerned that in prosecution cases I have examined, where clients have appealed, there is no process for fast tracking such appeals and indeed, sometimes an unlawful approach is taken by DWP and local authorities to deliberately delay progress on a benefit appeal until a criminal matter has been dealt with.

28. As part of the appeals process cases should be reconsidered by decision-makers. In the fraud cases I have done where matters have been referred to decision makers, there are extraordinary delays and poor quality revision decisions made by DWP staff who clearly have a weak grasp of the law and in some cases, whose statements even contain elementary grammatical errors.

29. The Court of Appeal has held that cases should not be delayed, DWP policy is also that cases should not be delayed and it is in the interests of the Criminal Courts that benefit overpayment appeals are disposed of before the criminal matter in order to narrow the issues for the Criminal Courts.

30. The DWP needs to issue much firmer operational guidance and to monitor its implementation.

31. Another issue of concern is the very tight timescale of one month in which to submit an appeal. By the time a decision has been received through the post and an unhappy benefit claimant has found competent independent advice, the initial one month may well be nearly up. The deadline used to be three months until it was changed following the Social Security Act 1998.

32. It appears to be appropriate for the DWP to have statutory deadlines for passing appeals to the Tribunals Service, or for the law to be changed so that all appeals were submitted to the Tribunals Service in order to ensure that the DWP and local authority deal with appeals in a timely manner.

33. I hope that this Memorandum of Evidence is helpful for the Committee. I would be happy to give oral evidence on this subject matter and I believe that I have highlighted serious failings in the benefit decision making process which is resulting in many people being the victims of an injustice in the criminal justice system.

34. Finally, even in cases where an elementary error was made in the amount of an overpayment and it is corrected, it is rare for a decision maker to offer an apology to the Court, the defendant and their legal advisers.

July 2009


 



[1] Secretary of State's report on the standards of decision-making in Job Centre Plus, the Pension Service, Disability and Carer Service and the Child Support Agency in 2002 and 2003. London, the Stationary Office 4th July 2006

[2] Information covering years 1999- 2007 provided personally by Ministry of Justice following a Freedom of Information request.

[3] Freedom of Information Act disclosure from DWP July 2009.