Benefit claimants 'owe £1.85 billion' in overpayments

Benefit claimants owe an "immense" £1.85 billion in overpaid money, but the Department for Work and Pensions is recovering less than £300 million a year, according to a parliamentary report released today.

The cross-party House of Commons Public Accounts Committee said the DWP needs to "significantly improve" the way it pays benefits and step up efforts to recover overpayments.

Among the 1.6 million debtors are more than 30,000 people who owe over £10,000 and more than 100,000 people who have four or more different debts.

About 8,600 of these owe sums topping £20,000 and their average £30,581 debt would take more than 60 years to repay at the maximum £9.75 a week which can be recouped from people still on benefits.

Today's report said the DWP has been successful in improving debt recovery procedures, increasing the amount recouped from £180 million in 2005-06 to £281 million in 2008-09.

But the size of the total debt was continuing to rise - reaching £1.85 billion by March 31, 2009, an increase of 11% on two years before - because overpayments were still larger than repayments.

The committee warned the situation is likely to get worse as the recession makes people less able to repay money owed.

Income Support claims accounted for more than 70% of all debts. And £9.3 million of overpayments of less than £65 were written off during 2007-08 because they were considered too small to justify the cost of recovering them.

Committee chairman Edward Leigh said: "An immense amount of money, currently £1.85 billion, is owed to the Department for Work and Pensions by claimants who have been paid too much benefit.

"The size of the debt is increasing, moreover, as the amount of overpaid benefit being clawed back is outstripped by the amount referred for recovery action. The current economic malaise is only likely to make worse the rate at which debt can be recovered.

"If the department is to deal with this rising trend in benefit debt, then it has to improve the way it approaches the prevention of debt. It should also review its procedures for validating claims for Income Support, a benefit which is particularly susceptible to big overpayments.

"It needs to set targets to reduce the debt owed by claimants with multiple and high-value debts, as well as targets for the difficult process of recovering money from claimants who regularly move on and off benefits.

"The department needs to equip itself with more up-to-date methods for recovering debt. It is currently trying to recover money without the sophisticated information it needs on the respective risks posed by different groups of debtors, together with data on the respective rates of return from these groups and ways of monitoring and measuring the effectiveness of different kinds of recovery strategy."

The report recommended that the DWP use text messages, email and phone calls to remind claimants of the need to inform benefit offices of changes in their circumstances which might affect the amount they can claim.

A DWP spokesman said: "The report recognises that DWP's debt management operations have improved, with recovery increasing from around £180 million in 2005/06 to over £280 million in 2008/09.

"Additionally 97% of the benefits paid out in 2008/09 were paid out correctly.

"Our new taskforce will address debtors who owe the department over £10,000 and we can take them to court if necessary. However, we accept that there is more we can do and so we will consider the committee's recommendations carefully."

Shadow work and pensions secretary Theresa May said: "Labour need to get a grip. It is unforgivable that while taxpayers are tightening their belts, the Government is racking up more debt through poor administration.

"These figures are symptomatic of a benefits system that isn't working.

"We can't go on like this, we need a change of Government to deliver the radical welfare reform this country so desperately needs."