Social security system - enhanced administration and compensation recovery: consultation analysis

4 Delivering value for money

4.1 Introduction

Scottish Government proposals in this chapter relate to the following Social Security Principle - 'the Scottish social security system is to be efficient and deliver value for money'^[13]. The Scottish Government aims to prioritise the needs of those who require assistance, but Ministers also have a duty to deliver value for money in keeping with the Public Finance Manual^[14]. By increasing efficiency and value for money the Scottish Government hopes to ensure that public money achieves maximum value for those people who rely on social security.

4.2 Compensation recovery

A person who has been affected by an accident, injury or disease might be entitled to social security benefits. If it was the fault of a third party, then a person might also be entitled to compensation. Compensation of this sort is usually paid by insurers on behalf of the party at fault after a settlement is agreed between the parties or is enforced through the courts.

Under UK legislation, before any compensation payment is made, a compensator (usually an insurance company) is legally obliged under the Social Security (Recovery of Benefits) Act 1997 to request a Certificate from the DWP. That Certificate states the amount of any recoverable benefit that must be repaid to the DWP by the compensator. The recoverable benefits are listed in the 1997 Act.

In the context of Scottish social security, compensation recovery is most relevant to disability assistance. The policy intent behind the existing UK scheme is that nobody should be compensated twice for the same injury or disease. Social security benefits should meet the person's needs while a settlement is being reached but they will be recovered if and once a settlement is agreed.

The consultation sought views on whether the Scottish Government should undertake recovery of Scottish social security assistance from compensation paid as a result of injury or disease for which a third party is liable.

4.2.1 Question 17: do you agree or disagree in principle that the Scottish Government should undertake recovery of Scottish social security assistance from compensation paid as a result of injury or disease for which a third party is liable?

Table C.13 and Table C.14 (Appendix C) provide the quantitative response to Question 17. Consultation respondent feedback was relatively mixed and points to note include that:

• 43% of consultation respondents who answered Question 17 agreed in principle that the Scottish Government should undertake recovery of Scottish social security assistance from compensation paid as a result of injury or disease for which a third party was liable
• 14% of consultation respondents disagreed with the proposal
• 43% of consultation respondents didn't know.

4.2.2 Question 18: please give reasons for your answer.

Over half of all consultation respondents (53%) answered Question 18. Note: this includes all responses to Question 18, including from consultation respondents who did not answer Question 17. All responses to Question 18 were reviewed and a best fit approach adopted to ensure that points raised by those who did not answer Question 17 were reflected in the narrative below. This approach was replicated throughout the report where appropriate.

Respondents who agreed with the proposal

Theme 1: nobody should be compensated twice for same injury or disease

Some consultation respondents (mainly individual respondents and a third sector organisation) agreed with this proposal as they considered it important that taxpayers' money was not used to compensate people twice for the same injury or disease.

These respondents said that recovery of reasonable levels of Scottish social security assistance could help ensure that a third party's legal obligation to fully compensate another person who they had harmed was not subsidised by the social security system. There was agreement among these respondents with the proposal that social security benefits should meet the person's needs while a settlement is being reached but should be recovered if and once a settlement was agreed.

The points raised above are reflected in the following (selected) respondent quote.

"Where a third party [is] at fault it should be a component part of any claim for compensation to include an element for the benefits that have been paid that would otherwise not have been paid. The extent of the recovery should be limited to this element of the compensation payment."

Glasgow City Council

Theme 2: NHS should be able to recover costs for treatment of occupational disease

A few consultation respondents (third and private sector organisations) agreed with the proposal in principle and additionally believed that the NHS should also be able to recover costs associated with the treatment of occupational disease in the same way they could for treating personal injuries.

Respondents who disagreed with the proposal

Theme 1: the proposal would place undue hardship on people

Some respondents (mainly third sector organisations and a public sector organisation) disagreed with the proposal as they felt that recovery of Scottish social security assistance from compensation paid as a result of injury or disease for which a third party was liable would place undue hardship or stress on people. These respondents felt that the main priority should be to ensure people were fairly compensated rather than recovery of assistance.

Some of the points raised above are reflected in the following (selected) respondent quote.

"Claiming money from a third-party source can be difficult and fraught with legal elements, actively worsening the claimant's life. Therefore, we do not believe it is within the best interest for the Scottish social security system to actively undertake recovery work if a person has been compensated because of injury or disease for which a third-party is liable."

Scottish Women's Convention

Respondents who answered don't know to the proposal

Theme 1: proposal was outside respondents' relevant experience

A few respondents (third sector organisations and an individual respondent) stated that they did not have enough relevant experience or expertise to comment on this proposal.

Other respondents who answered don't know commented that no-one should be compensated twice for the same injury or disease (third sector organisation) and that claimants should be fairly compensated for any distress caused (public sector organisation).

4.3 Alternatives to prosecution for low-value fraud

Social Security Scotland is responsible for investigations into allegations or suspicions of fraud. Currently, in cases where Social Security Scotland considers that there is enough evidence to suggest that a fraud offence under the 2018 Act has taken place, a referral can be made to the Crown Office and Procurator Fiscal Service (COPFS).

In Scotland, the decision on whether to institute criminal proceedings for fraud rests solely with COPFS. When deciding on the appropriate action, for example, prosecution or a non-court disposal such as a Procurator Fiscal Fixed Penalty (often referred to as a Fiscal fine), various factors are considered, including the value of the fraud in question and other aggravating factors.

The Scottish Government sought views in the consultation on whether it should introduce alternatives to referring a case for prosecution where small sums of money are involved.

4.3.1 Question 19: do you agree or disagree that Social Security Scotland should have available an alternative to prosecution where small sums of money have been obtained illegally?

Table C.15 and Table C.16 (Appendix C) provide the quantitative response to Question 19, and the findings were that:

• almost two-thirds of all consultation respondents who answered Question 19 agreed (65%) that Social Security Scotland should have available an alternative to prosecution where small sums of money have been obtained illegally
• 15% of consultation respondents disagreed with the proposal
• 20% of consultation respondents didn't know.

4.3.2 Question 20: please give reasons for your answer.

Over half of all consultation respondents (59%) answered Question 20, and the main feedback is outlined below.

Respondents who agreed with the proposal

Theme 1: prosecution would be disproportionate for low level offences

Many consultation respondents (third sector organisations and individual respondents) who agreed with the proposal considered prosecution for low level offences disproportionate. Points raised included that prosecutions could be expensive, time consuming, and stressful or intimidating for people.

These respondents believed that alternative approaches to prosecution would be more proportionate, cost effective and less damaging for people, including those who were vulnerable.

Some of the points raised above are reflected in the following (selected) respondent quote.

"Prosecution should only be used as a last resort where criminal intent has already been proved. An ability to repay the amount at a rate that allows someone to cover their ongoing commitments would be far more advantageous. Any prosecution could result in loss of their employment for example and would have a detrimental effect on the family not just the claimant."

One Parent Families Scotland

Respondents who disagreed with the proposal

Theme 1: fraudulent activity should always be prosecuted

A few consultation respondents (individual respondents and public sector organisations) were of the view that if fraudulent activity is suspected to have occurred, then it should always be referred for prosecution, assuming that there is sufficient evidence to suggest that a fraud offence has taken place.

Theme 2: provision should be made for legal defence

A few third and public sector organisations were concerned that if fraud cases were to be handled outside the legal system, then there should be an opportunity for people to access a legal defence. It was suggested that automatic penalties could penalise people for genuine mistakes or errors rather than fraudulent activity.

The points raised above are reflected in the following (selected) respondent quote.

"There could be instances where Social Security Scotland have determined that money has been obtained illegally, but there should always be a provision for a legal defence for clients. For example, a case where a client's partner was claiming a benefit illegally but without the client's knowledge or consent - yet the client is legally liable."

NHS Greater Glasgow and Clyde

Respondents who answered don't know to the proposal

Theme 1: proposal was outside respondents' relevant experience

A few third sector organisations stated that they did not have enough relevant experience or expertise to provide comment on the proposal.

A few respondents repeated points made earlier. Namely, that a more proportionate approach might be required for small sums of money and the importance of an appeals process and access to a legal defence.

4.3.3 Question 21: if you agree, please describe what alternatives to prosecution you consider might be appropriate where small sums of money have been obtained illegally?

Less than half of all consultation respondents (41%) provided an answer to Question 21.

Theme 1: repayment and administrative penalties

The main alternative to prosecution identified by consultation respondents (individual, public and third sector organisations) was repayment of monies fraudulently obtained plus a penalty or community payback.

A few respondents highlighted that it would be reasonable and sensible for Social Security Scotland to replicate the current DWP approach. Instead of referring a case for prosecution, the DWP has the option of issuing administrative penalties of up to 50% of the value of the fraudulently obtained overpayment. The minimum administrative penalty is £350, and the maximum is £5,000.

Similar to the previous question, a few consultation respondents highlighted that those subject to administrative penalties should have the right to appeal the Social Security Scotland decision.

A few respondents considered repayment of the fraudulently obtained funds to be sufficient penalty for people.

Some of the points raised above are reflected in the following (selected) respondent quote.

"Where small sums of money are involved, consideration should be given to the use of administrative penalties as currently used by DWP in the interest of limiting costs."

Stirling Council

Theme 2: community payback orders

Some individual respondents and public sector organisations identified community payback orders as an alternative to prosecution. A related point was that repayment and/or fines might disproportionately impact families that were experiencing financial hardship.

Some of the points raised above are reflected in the following (selected) respondent quote.

"This is a difficult area particularly for people on benefits whereby fines, overpayment deductions, etc result in individuals and families being pushed further into poverty and results in pressure on Foodbanks, Scottish Welfare Fund Crisis Grants."

North Ayrshire Council

4.4 Overpayment liability where someone acts on behalf of someone else

In some circumstances a person will need someone else to act for them in connection with their award of assistance. The 2018 Act specifies that a person who is entitled to assistance has a statutory liability to repay any overpayment made in error, except where they did not cause or contribute to that error, or if it was the sort of error a person could not reasonably be expected to have noticed. There are various options open to individuals to make this repayment, including through deductions from future entitlement to ongoing benefit, and it can be enforced through litigation in civil courts.

The way in which the 2018 Act currently works means that only the person entitled to assistance has a statutory liability to repay any overpayment. Others who act on behalf of someone else agree to be responsible for repaying overpayments when they agree to receive payments on someone else's behalf. Court action against a third party would be the only way to enforce recovery of the overpayment in these situations, where a person acting on someone else's behalf has also unreasonably refused to agree a repayment plan.

The Scottish Government is considering how to ensure that overpayments can be recovered from the recipient of the payment in whatever circumstances they may arise. The intent is that in all cases, whether the person has someone acting for them or not, Social Security Scotland should seek repayment from the person who actually benefited from the overpayment.

The consultation sought views on the proposal to allow for liability to be placed on both the individual with entitlement and the person who was acting for them when the overpayment happened.

4.4.1 Question 22: do you agree or disagree that third parties, such as appointees, should be included within the scope of statutory liability for overpayments in the way described in the consultation document?

Table C.17 and Table C.18 (Appendix C) provide the quantitative response to Question 22. Key points to note include that:

• a vast majority of all consultation respondents who answered Question 22 agreed (75%) that third parties, such as appointees, should be included within the scope of statutory liability for overpayments in the way described
• 10% of consultation respondents disagreed with the proposal
• 15% of consultation respondents didn't know.

4.4.2 Question 23: please give reasons for your answer.

Over half of all consultation respondents (56%) answered Question 23.

Respondents who agreed with the proposal

Theme 1: the need for flexibility

Some consultation respondents (mainly third sector organisations) agreed that flexibility was required to balance the need to protect vulnerable people and to avoid deterring people from volunteering to act on someone else's behalf by a risk to their personal finances. These respondents acknowledged that there might be mitigating circumstances whereby friends or family could be involved in helping someone else and could inadvertently make an honest mistake.

These respondents also agreed with the proposal that the same protections which currently exist for people should also apply to these sorts of third parties. They believed that third parties who act on someone else's behalf should not be held liable where they did not cause or contribute to that error, or if it was the sort of error that a person could not reasonably be expected to have noticed.

In addition, some of these respondents considered that liability should only apply to those who had officially been appointed to act on a person's behalf and not friends and family that had, for example, simply assisted a person to complete a form.

Theme 2: liability only in cases of financial gain

Some consultation respondents (mainly third sector organisations) believed that third parties, such as appointees, should only be liable in cases of their own financial gain. These respondents suggested that, regardless of whether or not a person had acted deceitfully, it would be unfair to hold that person financially liable where they had not received financial benefit.

Respondents who disagreed with the proposal

Third sector organisations who disagreed with this proposal felt that a third party, such as an appointee, might be deterred from volunteering to act on someone else's behalf if they were included within the scope of statutory liability for overpayments. One of these respondents also repeated the point raised that liability should only apply where a third party had gained financially from an overpayment.

Some of the points raised above are reflected in the following (selected) respondent quote.

"If the appointee has not personally profited from the overpayment then it seems unjust and unfair that they should be financially penalised by being made liable to repay it. It is instead the recipient of the benefit that is financially better off and for any other debt it would be their and no one else's responsibility to repay it. However, if the benefit recipient does not have capacity, it would be difficult to establish liability for repayment."

Inclusion Scotland

Respondents who answered don't know to the proposal

Limited feedback was provided from consultation respondents (a third sector organisation and an individual respondent) who answered 'don't know' to this proposal. Consultation responses referred to the complexity and challenges of proving fraudulent activity of a third party liable for overpayments.