Devolved Social Security benefits - debt recovery - transfer of jurisdiction: consultation

1. Introduction

1.1 This consultation is about the recovery of Scottish devolved social security benefits paid in error, and whether the jurisdiction of some, or all, of the competence over the debt recovery should be transferred from the sheriff court to the Social Security Chamber of the First-tier Tribunal (FtT).

1.2 Chapter 5 of Part 2 of the Social Security (Scotland) Act 2018 ('the 2018 Act'), 'Recovery of Value of Assistance' sets out the powers of Social Security Scotland to recover overpaid benefits as a result of an error.

1.3 This overpayment may arise due to an error by Social Security Scotland (official error), client error, third party error, or through benefits which may have been received fraudulently. The overpayment is the difference between the benefit given, and the benefit (if any) that should have been given had the error not been made.

1.4 Section 64 of the 2018 Act outlines the circumstances in which a client may be liable to repay an overpayment. An individual will not be liable to repay an overpayment where they are not at fault, for example where the error is made by Social Security Scotland, unless it was an overpayment that an individual would have been reasonably expected to notice. In all other circumstances Social Security Scotland may seek to recover overpayments but in doing so (under Section 65 of the 2018 Act) they will take into account the individual's financial and other circumstances they consider relevant.

1.5 Overpayments in the UK benefit system^[1] are currently around 2.4% of the benefit expenditure. 1.4% of this is fraud, 0.6% claimant error and 0.4% official error. The Scottish Fiscal Commission Economic and Fiscal Forecasts report of August 2021^[2] has forecast that Social Security Scotland will be administering benefit expenditure in excess of £5.2 billion in 2026-27 so a corresponding error of 2.4% overpayments potentially amounts to around £125 million in that year. If not recovered, this would be money lost to the investment in social security or other public services in Scotland.

1.6 It is important that overpayments are avoided wherever possible in the first place and Social Security Scotland's key objectives are to minimise errors through thorough staff training and IT deployment; early detection and correction of any errors that do occur and to develop effective processes to recover overpayments. Over time Social Security Scotland will have their own overpayment data which will be able to inform these activities.

1.7 Under Section 65 of the 2018 Act, in deciding on whether to pursue recovery, Social Security Scotland will take into account the individual's financial situation through an 'affordability assessment' based on the Common Financial Tool. Other circumstances will also be taken into account. This approach seeks to ensure that money will not be recovered in a manner that knowingly results in hardship for the individual.

1.8 The Department for Work and Pensions (DWP) have a wide range of powers of recovery available to them including deductions from benefits, recovery from earnings, confiscation/compensation orders and in some circumstances referral to a debt collector. The DWP may also impose civil or administrative penalties.

1.9 However, the Scottish Ministers have taken a different approach and the only power that Social Security Scotland has to recover overpayments is by deduction from future devolved benefits. Instead, emphasis is placed on ensuring the right payments are made at the right time to the right people, correcting errors quickly and taking into account the individual's financial circumstances.

1.10 Social Security Scotland will always aim to agree a schedule of repayments with the individual through a variety of payment methods. This could be repayment in full if appropriate, an affordable payment plan, deduction from future devolved recurring benefits, voluntary offsetting off future payments, or recovery from a deceased person's estate if applicable. Any plan can be managed over time and may see temporary suspension of recovery depending on the circumstances of the client.

1.11 Where the individual has no recurring entitlement to a devolved social security benefit, and a mutually acceptable agreement is not reached, or where the individual fails to repay after repeated approaches, then the eventual recourse for Social Security Scotland is recovery through the civil court process. It will be for Social Security Scotland to prove that there is a debt and the client will have the right to challenge that in court by way of defending an action for recovery.

1.12 During the passage of the Social Security (Scotland) Bill 2018 through the Scottish Parliament, concerns were raised by stakeholders that the 'overpayment liability' in some instances would only be determined when challenged through the sheriff court and this was viewed as more daunting for vulnerable individuals than attending a First-tier Tribunal. Therefore at Stage 3 an amendment was made to the Bill to allow some or all of the powers in relation to social security debt recovery to be transferred from the sheriff court to the First-tier Tribunal. The 2018 Act had the following provision:

Section 68. First-tier Tribunal's jurisdiction

The Scottish Ministers may by regulations transfer to the First-tier Tribunal for Scotland some or all of the competence and jurisdiction that a sheriff has in relation to the recovery of money owed under section 63.

1.13 Section 68 was subsequently repealed through the 'Social Security Administration and Tribunal Membership (Scotland) Act 2020' and replaced with section 87A. This section extends the provision of the transfer of jurisdiction to top-up benefits and puts the Scottish Ministers policy commitment to consult on the issue on a statutory basis.

1.14 This consultation is to determine which, if any, powers over debt recovery should be transferred from the sheriff court to the First-tier Tribunal.