Analysis of written responses to the consultation on social security in Scotland

17. Managing overpayments and debts

Current arrangements

17.1 The Scottish Government set out its proposals for current arrangements in Part 3 of the consultation document.

Question - Could the existing arrangements for recovering social security overpayments be improved in the new Scottish social security system? If yes, please explain your answer.

Table 17.1 Could the existing arrangements for recovering social security overpayments be improved in the new Scottish social security system?
	Yes		No
Respondent group	Number	%	Number	%	Total
Individuals	40	71%	16	29%	56
Organisations	63	93%	5	7%	68
All respondents answering	103	83%	21	17%	124

Note: A full breakdown of responses by respondent group is included in Annex 2 (available to download separately as part of this publication).

17.2 In total, 124 respondents answered the closed part of this question. Most respondents (83%) felt that the existing arrangements for recovering social security overpayments could be improved in the new Scottish social security system. Organisations were more likely than individuals to say 'yes', and there was overall support from across respondent groups. However, a substantial minority of individuals (29%) said 'no'.

17.3 Further comments were provided by 118 respondents (78 organisations and 40 individuals). As the question clearly asked only those answering 'yes' to provide an explanation, most of the comments came from those calling for improvements.

17.4 The main themes were:

• the importance of considering the rate level of deductions; and
• that some overpayments should not be required to be repaid.

Level of deductions

17.5 The main theme emerging was that it was very important to consider the rate at which overpayments were repaid, in line with individual circumstances. A large number of respondents felt that the way in which overpayments were recovered needed to be improved. The main problems people had with the existing levels of deductions were:

• there was too little flexibility - with respondents suggesting that in future, decisions should consider individual circumstances;
• there was too little consideration of impact - decisions didn't recognize why people needed benefits and could push them further into severe hardship, destitution and homelessness;
• several overpayment deductions could occur at once - and this could be hard to understand;
• deductions represented a large proportion of the benefit received - deductions of 20 to 25% could be taken, which people felt was too high (and that 5 to 10% would be fairer);
• repayments could happen immediately - with respondents suggesting a month's notice in all cases;
• repayments could happen with appeals on-going - with respondents suggesting appeals processes are exhausted before any repayment was required; and
• people may not understand the impact of the deduction - people may not have all the information about their future entitlements when they hear about repayments, so may not be able to judge the impact on their finances.

"Currently it seems like there is no requirement for DWP to actually evidence when it says an overpayment has been made. Just 'we say so you do.' This is wrong! People are left in awful hardship when repayments they dispute are recovered...sometimes years after alleged overpayment. Repayment must always be based on ability to pay based on income."
Individual

"Ensuring entitlement and overpayment decisions are made at the same time allowing the relevant entitlement as well as overpayment decision to be challenged. At present an applicant may not realise the consequences of an entitlement decision until they receive demand for payment - at which point they are often too late to be able to challenge a decision."
East Ayrshire Council

17.6 Respondents were very concerned about the impact that the level of repayments could have on people's lives, such as stress, poverty and financial hardship, lack of access to food and warmth and resulting in people accessing food banks and / or high rate borrowing.

"In addition to the stress this could cause, care leavers may be managing on very strict budgets and even a small change to their income could have a huge impact on their ability to meet their basic needs for food and warmth."
CELCIS

"Let the person pay it back at a low rate - mistakes are mistakes. I've seen people have to pay loans back of hundreds within a month or two which leaves them with nothing."
Individual

"Overpayment and debt should not be used as a means to punish and impoverish the poor. Repayment levels should be agreed at a face to face meeting between the claimant, their advocate and the agency seeking repayment, and not simply be subject of administrative decision making processes."
Scottish Socialist Party

Requirement to repay overpayments

17.7 Many respondents gave their views on which types of overpayments should be recovered, with many feeling that certain types of overpayment should not be recovered from individuals.

"Where an overpayment has occurred, discretion should be applied to ensure it is appropriate to recover the overpayment."
The Poverty Alliance

"I can see that recovering an accidental overpayment could cause difficulties for the individual whose circumstances mean it has already been received with joy and spent on, say, new shoes for the children."
Individual

"We agree that official error which has caused overpayment to a claimant should not be recoverable. This will encourage a culture in the new agency of getting decisions right the first time. It may require checks and balances at the processing stage but will encourage good practice."
Ayr Housing Aid Centre

17.8 A few, mainly local authority respondents, felt that it was important to recover all overpayments to ensure fairness to all contributors.

17.9 The Scottish Association of Landlords raised a particular issue that it believed to be unfair that landlords were requested to repay monies paid in relation to the housing element of Universal Credit, and that it would be more appropriate to claim this from the claimant, as well as offering financial advice.

Wider issues

17.10 A range of other issues were raised, including:

• some felt the process needed to be simpler, to help people to be able to submit accurate applications, understand their benefit awards and know when to provide updates, and who to;
• some felt that it was important for the agency to admit when a mistake had been made, and try to reduce the errors it makes;
• some felt that it was important to share information between agencies, and to act quickly when changes of circumstances were reported to reduce overpayments;
• a few reiterated that there was a need for more advice and support for individuals; and
• a few felt that many could have a fear of engaging with social security agencies, out of worry that they will be perceived negatively or have benefits removed.

Financial advice

17.11 The Scottish Government set out its proposals for financial advice in Part 3 of the consultation document.

Question - What are your views on the role that financial advice can play in the recovery of overpayments?

17.12 There were 98 responses to this question (56 organisations and 42 individuals).

17.13 A large number of respondents felt that financial advice could help, with some describing it as 'vital' or 'crucial'. Some felt that financial advice should be offered regardless of whether there was an overpayment, with a few feeling there should be a focus on prevention and early intervention. Some felt that where overpayments were being recovered, financial advice would be helpful in:

• supporting individuals to reconsider their income, expenditure and debt;
• offering options, advice and support;
• increasing financial literacy; and
• ensuring overpayments are correct and the arrangement is sustainable.

17.14 A few emphasised the importance of financial advice being separate from any recovery process.

"Financial advice, such as a local authority money advice provider, can assist the individual with budgeting, and present a realistic picture of the person's income, and outgoings. The aim would be that the individual's budget is not impacted to such a level that it could have an adverse effect on health and wellbeing. Local Welfare Rights Service should also be available to challenge any recoverability decision."
East Renfrewshire Council

17.15 However, some felt that it was important to recognize that financial advice would not be able to solve fundamental financial hardship occurring as a result of recovering overpayments.

"Financial advice can help. Money helps more."
Individual

"Some claimants will welcome advice, but it should be recognised that the essential cause of poverty is lack of income. When people are in hardship and falling in to debt because their income, either from paid work or benefits, is too little, financial advice will make limited impact."
Midlothian Community Planning Partnership/ Midlothian Council

"If the Government recognises that recovering overpayments will cause financial hardship, then a different approach to debt collection is required. As the biggest provider of independent benefits advice and the network which provided the Money Advice Service for many years, we have substantial evidence which shows that no amount of budgeting advice will fix the fact that people do not have enough to live on if you start recovering benefits from them at an aggressive rate."
Citizens Advice Scotland

17.16 A few respondents questioned what was meant by financial advice, and whether this specifically meant advice provided by an Independent Financial Advisor.