Scotland's social security system: enhanced administration and compensation recovery - consultation

Delivering Value for Money

One of the social security principles is 'the Scottish social security system is to be efficient and deliver value for money'. During the passage of the 2018 Act, the Scottish Government noted concerns that this principle could be seen to undermine the other six. The needs of those who require assistance remains and will always be the Scottish Government's first and most important consideration but Ministers also have a duty to deliver value for money in keeping with the Public Finance Manual.

Achieving efficiency and value for money also reflects the need to ensure that every penny of public money achieves maximum value for those who should benefit most from the system – the people who rely on social security.

As the other principles and the Scottish Government's wider approach make clear, this principle is firmly not, and never will be, about using public finances as an ideological excuse to breach or undermine people's rights.

This principle is echoed in the commitment contained in Social Security Scotland's Charter, which was co-designed with people with lived experience of the welfare system, requiring Social Security Scotland's resources to be allocated both fairly and efficiently.

Each of the proposals under this theme are therefore aimed at ensuring that the maximum value is achieved when delivering this crucial public service in Scotland.

Compensation Recovery

Background

A person who has been affected by an accident, injury or disease may be entitled to social security benefits as a result. If it was the fault of a third party then the person may also be entitled to compensation from that third party.

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 Department for Work and Pensions (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 devolved social security, compensation recovery is most relevant to disability assistance and to Industrial Injuries Disablement Benefit, which will be replaced by a Scottish equivalent as part of the devolution of social security.

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.

Example

A person is injured in a bus accident which is found to have been caused by the bus company. As a result of the injuries the person sustained they become eligible for Personal Independence Payment (PIP). The insurer of the bus company must pay back to the Department for Work and Pensions the amount of PIP paid to that person (up to the value of the total compensation to be paid) from the day after the accident until either the date that person's claim is settled, or 5 years from the day after the accident – whichever date is earliest.

Issues to consider

A power to recover Scottish assistance from awards of compensation is consistent with the responsibilities in the Scottish Public Finance Manual, and with the social security principles. The Scottish Government's view is that a third party's legal obligation to fully compensate another person who they have harmed should not be subsidised by the social security system. Scottish Ministers' intention is to recover Scottish assistance from compensation to the same extent as DWP recovers.

The Scottish Government will consider further consultation on this topic in future, taking detailed technical and administrative processes into account with key stakeholders, prior to the drafting of any legislation which may be required.

Q17. 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?

Agree / Disagree / Don’t know

Q18. Please give reasons for your answer.

Alternatives to prosecution for low-value fraud

Background

The Scottish Government considers social security an investment in the people of Scotland, as stated plainly in the social security principles. In order to ensure that the right people are paid the right amount at the right time, we must ensure that appropriate action is taken to prevent fraud from entering the system.

In those cases where it does enter the system, it is vitally important that the necessary tools are in place to detect it and respond efficiently and proportionately. Chapter 6 of the 2018 Act sets out fraud offences: obtaining assistance by deceit, failing to notify a change of circumstances and causing a failure to notify a change of circumstances.

We have been clear that we will not seek to criminalise those who make genuine errors, and where someone fails to report a change of circumstances an offence will only be committed if a person does not have a reasonable excuse.

All investigations are undertaken with a presumption of innocence and individuals will always have an opportunity to state their case and offer their view of events.

Social Security Scotland is responsible for investigations into allegations or suspicions of fraud. The Social Security Assistance (Investigation of Offences (Scotland) Regulations 2020 set out the investigative powers of Social Security Scotland and authorisations required to use them, as well as the potential penalties for failing to provide information when asked. These regulations were subject to a public consultation and are underpinned by a published Code of Practice.

Issues to consider

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 e.g. prosecution or a non-court disposal such as a Procurator Fiscal Fixed Penalty (often referred to as a Fiscal fine), a number of factors are taken into account, including the value of the fraud in question and other aggravating factors.

Instead of referring a case for prosecution, the DWP has the option of issuing administrative penalties of up to 50 per cent of the value of the fraudulently obtained overpayment, up to a maximum of £5,000.

Scottish Ministers currently have no power to issue administrative penalties independent of those exercisable by COPFS.

As a result, it is possible cases where small sums of money have been attained illegally could be referred for prosecution, when some other, lesser form of action may have been more appropriate and have less impact on individuals.

Q19. 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? 

Agree / Disagree / Don’t know

Q20. Please give reasons for your answer.

Q21. If you agree, please describe what alternatives to prosecution you consider might be appropriate where small sums of money have been obtained illegally?

Overpayment liability where someone acts on behalf of a client

Background

In some circumstances a client will need someone else to act for them in connection with their award of assistance. The relationship between someone who cannot act for themselves and the person acting for them is based on trust. Whether they are judicially or administratively appointed, they will usually take decisions that will benefit the person they are acting for, and not themselves.

However, just like anyone else, they may make honest mistakes or bad judgements when carrying out their duties and some will encounter conflicts of interest.

For example, a failure to report a change of circumstances (such as hospitalisation) quickly might result in an overpayment. In the vast majority of cases, by the time it is discovered the overpaid funds will have made their way to the client, either directly, or in the form of goods and services from which they have benefited.

Where the person acting for them has acted reasonably, in good faith, and in accordance with the limit of their powers, the Scottish Government considers it unfair to hold them personally liable if they did not benefit from the payment themselves.

The 2018 Act currently 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.

Where someone else applies for, manages and receives payments on a person's behalf, it will usually be them who has either been at fault, or who would have been in a position to notice the error.

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 a client's behalf agree to be responsible for repaying overpayments when they agree to receive payments on the client's behalf.

The only way to enforce recovery of the overpayment in these situations, where the person acting on the client's behalf has also unreasonably refused to agree a repayment plan, would be by court action against that third party.

Issues to consider

The Scottish Government is considering how to ensure that overpayments can be recovered from the recipient of the payment in whatever circumstances it may arise. We do not think it is fair to seek recovery from vulnerable clients where due to the bad faith of another person they saw no benefit from those payments. However, nor do we consider that people should be deterred from volunteering to act on behalf of a friend or family member by a risk to their personal finances, so some flexibility is required.

We therefore propose to allow for liability to be placed on both the individual with entitlement and/or the person who was acting for them when the overpayment happened. The policy intent of this proposal is that in all cases, whether the client has someone acting for them or not, Social Security Scotland should usually seek repayment from the person who actually benefited from the overpayment.

Where the client has benefited, then they should repay, with the arrangements normally being agreed with the person acting for them, including through deductions from ongoing payments.

However, where the third party has acted deceitfully, for example misrepresenting a client's circumstances to obtain an overpayment which they then kept for themselves, we consider that third party should be liable. We anticipate this would only occur in minority of complex cases where financial abuse was uncovered either from the outset or in the course of enforcement proceedings.

The Scottish Government's view is that the same protections which currently exist for clients should also apply to these sorts of third parties. This would mean that the third party would not be 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. Additionally, where a payment is to be recovered, every effort would be made to agree a mutually acceptable repayment plan with the third party in question.

Q22. 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 above?

Agree / Disagree / Don’t know

Q23. Please give reasons for your answer.