Carers aren’t the only victims of the DWP’s benefit overpayment policies

Recent media coverage has rightly shone a spotlight on the unfair treatment of carers having benefit overpayments recovered by the Department for Work and Pensions (DWP). Carers have been accused of fraud, been taken to court, had inheritances seized, and been forced to sell their homes as the DWP has recovered huge overpayments caused by minor breaches of Carers Allowance earnings rules. But this is just the tip of the iceberg. Across the welfare system, the recovery of benefit overpayments is leading to hardship for thousands every year.

Overpayments can happen through ‘claimant error’, like when a claimant forgets to report a change of circumstances like a child moving out of home. Or an ‘official error’, where the government is at fault for paying someone more benefits than they’re entitled to. The government can now recover overpayments caused by official error, unfairly leaving people with reduced incomes through no fault of their own. But even in cases caused by claimant error, the overpayment recovery process needs to be more transparent and humane.

No matter how long ago someone was overpaid, the government can recover the overpayment, like by deducting up to 15% of someone’s standard Universal Credit (UC) award each month. By definition, this leaves them with less income than their assessed needs. 1 in 4 households receiving UC are in a negative budget, with more going out than coming in each month. For these families, deductions can make the difference between being able to just make ends meet and falling further behind with bills each month. Almost a third of those we helped with overpayment deductions over the past year needed support with a food bank referral.

The overpayment problem has grown over the past few years, and will continue to grow as the managed migration of people on legacy benefits to UC picks up pace this year. 23% more people already came to us for help with deduction issues related to overpayments in 2023 than in 2019.

We’ve helped nearly 4,000 people with overpayment deductions in the past 12 months. Many of their stories are reminiscent of carers’ experiences reported in the media: receiving out of the blue letters telling them they owe thousands of pounds and navigating an opaque benefits system full of poor record-keeping.

“No information being given, no advance warning, nothing” were the words of one adviser. A substantial majority (75%) of frontline advisers we surveyed said the government was fairly or very poor at communicating the reasons for benefit deductions to claimants. Our advisers frequently see people faced with sudden deductions for overpayments they knew nothing about. Often those coming to us for help only realise they have overpayment deductions once these have already been taken off their UC award, leaving them with a sharp drop in much needed income.

Caught in a “Kafkaesque mess”

“An almost Kafkaesque mess” is how a policy expert described carers’ experiences of overpayments to MPs in March. Lack of information is the first challenge people face. Too often, UC statements may only describe a deduction as “other DWP recovery”. The basic facts of which benefit was overpaid, when the overpayment happened, and how much debt is outstanding might only be established after hours spent calling different departments within DWP and HMRC.

For older tax credit overpayments in particular, there might not be any records available at all — though the deductions are still reducing people’s benefits income each month. One of our frontline advisers told us he often found himself in the “bizarre situation” of being told by DWP and HMRC that a tax credit debt is “too old, we don’t hold records on that”, even though enough records must have existed for the debt to start being collected. This lack of information makes it harder for people to find out what they might owe, and to challenge incorrect deductions.

Joe* cared for his mother until she died, and was receiving Carer’s Allowance and UC. When Joe came to his local Citizens Advice for help with his benefits, his adviser spotted that he was having deductions for an overpayment. It seemed that UC had not taken his Carer’s Allowance income into account, and he had been overpaid. But when our adviser looked at Joe’s UC statements again, the ongoing deductions looked incorrect. Joe was already having deductions from his UC during the time when the overpayment was said to have happened. Joe and his adviser queried this. The DWP’s answer suggested that Joe’s old UC statements had been retrospectively corrected. Joe’s statements no longer reflected what he had been actually paid at the time, adding an unnecessary barrier to understanding and tackling his deductions.

Paying for the government’s mistakes

Like many carers, the people we support have been paying the price for the DWP’s mistakes. Now that the DWP has powers to make deductions for all overpayments, it no longer keeps records on whether overpayments are caused by official or claimant error, though publishes estimates of these overpayment rates. When the DWP is given the information it needs to make accurate payments, but still allows overpayments to build up — the people we help suffer the consequences.

Amina* is studying for a degree 2 days a week, and was also working part-time to support her 3 children. When her agency lost one of their contracts, Amina lost her job. To make ends meet, she tried to increase her UC, but her claim was suddenly closed and she was told she owed £4,500 for an overpayment. Months before, Amina had reported her student status in her UC journal and provided copies of her maintenance loan statements at her Job Centre appointment. Despite doing everything to inform DWP about her student loan, it wasn’t taken into account for 4 months, leaving Amina with a £4,500 overpayment debt that isn’t her fault. Without income from her job or UC, Amina couldn’t feed her family. Our advisers referred Amina to a local food bank, and will help her ask for the overpayment recovery to be waived because it is causing her family hardship.

A growing problem

As the DWP aims to migrate around 900,000 households claiming legacy benefits to UC before the end of this year, we fear the scale of overpayment deduction problems will only grow. An estimated 8 in 10 tax credit claimants who have to claim UC this year have an outstanding overpayment, which the DWP will start to deduct from their UC award. This means more people will be faced with unexpected bills for historic overpayments.

And to make matters worse, problems with the DWP’s own guidance is creating the overpayments and deductions of the future. If someone switching from legacy benefits would be worse off on UC, they can receive an extra amount — the Transitional Element (TE) — to temporarily protect their income. Issues have emerged with how the DWP has interpreted its own guidance and, in some cases, money is now being claimed back off households after the DWP wrongly calculated their TE.

3 changes we need for a fairer overpayment process

  1. The DWP needs to be more proactive and responsive, to prevent overpayments from building up for which claimants will end up paying the price. No one should be paying for the government’s mistakes.
  2. The DWP needs a more transparent and informative recovery process. The DWP should keep and share fuller records of benefit payments, ensure they engage with people before overpayment recovery begins, and stop retrospectively over-writing online records. People should be fully informed about their benefit entitlements and empowered to challenge overpayment deductions they think are wrong.
  3. We need to see a more humane overpayment recovery approach. This approach would involve writing off overpayments debts for some. This would apply especially to cases where overpayments occurred many years ago, which the government could have identified and prevented sooner, as well as more recent overpayments resulting from flawed calculation processes, such as the Transitional Element.

Our upcoming report, Designing Out Deductions, will set out our proposals in more depth.

*All names have been changed.