DWP slated over £150m carer's allowance clawback

The Department for Work and  Pensions (DWP)  has identified more than double the number of carer’s allowance overpayments since introducing new data matching systems with HMRC and employing additional staff, and is planning to recover £150m, according to a report by the National Audit Office (NAO)

Carer’s allowance is paid to people who care for people on a qualifying disability benefit. DWP detected 93,000 overpayments in 2018-19 compared with an average of 41,000 a year it identified in the previous five years. While many overpayments were for one week, some cases went on for more than a decade before they were discovered.  

As a result, DWP is planning to claw back more repayments from carers for overpayments of carer’s allowance, and aims to recover around £150m from just under 80,000 carers. More than 7,000 carers have debts in excess of £5,000, and there are 133 people who each owe over £20,000.

At the standard rate of repayment for those on benefits, it will take an average of three years, three months for carers to repay the overpaid benefits. For those on benefits with an overpayment of £20,000 this could require repayments for the next 34 years.

DWP has reclaimed £22m of overpaid carer’s allowance in 2018-19 by reducing people’s benefits and through mandatory deductions from employee earnings.

However, the NAO says the department has not conducted any recent evaluation of the impact of its debt recovery policies and nor is it required to under legislation.  It also has only a limited understanding of underlying rates of fraud and error.

DWP uses sampling to estimate the underlying levels of over (5.5%) and underpayments (0.1%) of Carer’s Allowance, with the assumed rates based on measurements from more than 20 years ago. The NAO has repeatedly recommended that DWP update its estimates, and it is now working on a new estimate for 2020.

Most detected overpayments arose because carers failed, as soon as ‘reasonably practicable’, to notify DWP with correct information about their earnings, and the NAO says the department acknowledges that it needs to improve its communications with carers to raise their understanding of their obligations. 

Few overpayments are proven fraud. The number of people referred for prosecution for fraud fell from 1,176 in 2014-15 to 483 in 2018-19. In 2018, DWP cleared a backlog of 1,000 potential prosecution cases partly by applying more financial penalties, known as administrative penalties. It agreed 1,253 administrative penalties in 2018 compared with an average of 860 in the previous four years.

The NAO says some errors are DWP’s fault where it has the information to assess an award but makes a mistake, with its internal estimates suggesting an overpayment rate of 1.8% and an underpayment rate of 0.8% in 2017-18.

The report said understaffing and an increase in claims for carer’s allowance resulted in backlogs which peaked at 52,000 unprocessed new claims in September 2017 and 104,000 unprocessed changes in circumstance in November 2018. Delays in processing claims and changes meant that overpayments were not identified in a timely manner.

DWP has recently introduced a new system that flags data matches more promptly and estimates this will produce additional savings of £136m by 2025-26. However it has two limitations. Firstly, the new system produces many more matches which need to be investigated, which it only does manually. Secondly, the new system will not detect all overpayments, for example in circumstances where individuals are no longer paid carer’s allowance.

DWP is also currently unable to register 254,000 carers (30%) due to software issues but is trying to resolve these.

Frank Field, chair of the work and pensions committee, said: ‘Once again, the NAO has devastatingly laid bare the incompetence at DWP, and its stark human cost. Not for the first time, we see DWP squeezing those least able to afford it. It will chase down carers who provide such an immense service to our society, potentially cutting their income for decades – when it knows that a large part of the responsibility lies squarely at its own door.

‘Rather than making things worse, why doesn’t the department just spare us all: end this massive scandal, focus on the real fraudsters and write off the overpayments it has allowed to build up unchecked.’

Investigation into overpayments of Carer’s Allowance

Pat Sweet

Pat Sweet |Reporter, Accountancy Daily [2010-2021]

Pat Sweet was the former online reporter at Accountancy Daily and contributor to the monthly Accountancy magazine, pub...

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